Assistant Commissioner of Income-Tax, Central Circle, KORBA(CG) V. Shri B.B WASAN, KORBA(CG)

ITA 175/BIL/2011

• Counselvise Citation: 17524714 RSA 2011
• Duration Of Justice: 3 year(s) 4 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-12-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 03-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B LAHIRI
• Keywords: Reopening of assessment; Valuation report
• Section: 147; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, RAIPUR BEFORE SHRI H.L. KARWA, PRESIDENT AND SHRI REJENDRA, ACCOUNTANT MEMEBR ITA NOS.176 & 175/BLPR/2011 A.YS. 2005-06 & 2006-07 ASSTT. COMMISSIONER OF INCOME, VS. SHRI BHARAT BHUS HAN WASSAN CIRCLE, KORBA. WASAN LANE, KORBA. (PAN: AAEPW 2133 Q) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI B. LAHIRI RESPONDENT BY : NONE DATE OF HEARING : 17.12.2014 DATE OF PRONOUNCEMENT : 17.12.2014 ORDER PER H.L. KARWA, PRESIDENT THESE TWO APPEALS BY THE REVENUE ARE DIRECTED AGAIN ST THE CONSOLIDATED ORDER OF LD. CIT(A), BILASPUR DATED 29.03.2011 RELATING T O A.YS. 2005-06 & 2006-07. 2. THE COMMON GROUNDS OF APPEAL READ AS UNDER :- I) THE LD. CIT(A) ERRED IN LAW AND ON FACTS BY ALL OWING THE APPEAL OF THE ASSESSEE EVEN WHEN THE A.O. HAVIN G INFORMATION IN POSSESSION HAD RECORDED REASONS TO B E BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. 2 ITA NOS .176 & 175/BLPR/2011 A.YS. 2005-06 & 2006-07 II) THAT THE LD. CIT(A)S ORDER BEING ERRONEOUS, PE RVERSE AND CONTRARY TO THE FACTS ON RECORD, THE SAME MAY B E REVERSED WHILE THAT OF THE AO BE RESTORED. III) THAT THE APPELLANT ASSESSING OFFICER RESERVE T HE RIGHT TO AMEND, MODIFY OR ADD ANY OF THE GROUNDS OF APPEAL PREFERRED. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS IN THE CONSTRUCTION BUSINESS AND CONSTRUCTS FLATS AND COMP LEXES. FOR A.Y. 2005-06 THE ASSESSEE HAS SHOWN INVESTMENT IN THE CONSTRUCTI ON OF A COMPLEX NAMED SHYAM ENCLAVE SITUATED AT TRANSPORT NAGAR, KORBA (C G) OF RS.21,35,068/, WHILE THE VALUATION OFFICER VALUED THE COST OF CONS TRUCTION AT RS.26,89,131/-. AFTER OBTAINING THE DVOS REPORT DATED 30.11.2007, THE A.O. ISSUED NOTICE UNDER SECTION 148 OF THE INCOME TAX ACT, 1961 (IN S HORT THE ACT) ON 13.12.2007 FOR THE A.Y. 2005-06. NOTICE UNDER SECT ION 148 OF THE ACT WAS ISSUED ON 07.01.2008 FOR THE A.Y. 2006-07. THE ASS ESSEE VIDE SEPARATE LETTERS SUBMITTED THAT THE RETURNS FILED UNDER SECT ION 139 OF THE ACT MAY BE TREATED AS RETURNS FILED IN RESPONSE TO THE ABOVE N OTICES ISSUED UNDER SECTION 148 OF THE ACT. DURING THE COURSE OF ASSESSMENT PR OCEEDINGS, THE ASSESSEE SUBMITTED WRITTEN SUBMISSIONS ALONG WITH COPY OF TH E APPROVED VALUERS REPORT. THE A.O. OBSERVED THAT AT THE TIME OF VALU ATION BY THE DVO, THE ASSESSEE DID NOT FURNISH DETAILS OF CONSTRUCTION AC COUNT ALONG WITH DAY-TO-DAY EXPENDITURE STATEMENTS WITH SUPPORTING BILLS AND VO UCHERS. IN THIS REGARD, THE 3 ITA NOS .176 & 175/BLPR/2011 A.YS. 2005-06 & 2006-07 CONTENTION OF THE ASSESSEE WAS THAT HE HAD MAINTAIN ED THE DETAILS OF THE COST OF MATERIAL USED AND COST OF CONSTRUCTION AND SINCE THE COST OF CONSTRUCTION WAS LOWER, SUPERVISION WAS DONE BY THE ASSESSEE HIM SELF. THE ASSESSEE ALSO PRODUCED SOME VOUCHERS TO SHOW THAT COST OF MATERIA L WAS LOW AT THAT POINT OF TIME. THE A.O. DID NOT VERIFY THE SUBMISSIONS OF T HE ASSESSEE STATING THAT THE SUBMISSIONS WERE MADE LATE ON 29.12.2008, AND IT WA S NOT PRACTICABLE TO VERIFY THE SAME. HE FURTHER OBSERVED THAT NO REASO NS WERE SUBMITTED FOR VARIATION IN TWO VALUATION REPORTS. 3.1 FOR A.Y. 2006-07 ALSO, THE ASSESSEE MADE INVEST MENT IN THE SAME COMPLEX. THE A.O. TOOK THE VIEW THAT THERE IS SUPP RESSION IN INVESTMENT SHOWN IN COMPLEX. HE, THEREFORE, DEPUTED THE INSPE CTOR OF THE DEPARTMENT TO ENQUIRE IN THE MATTER AND THE INSPECTOR REPORTED TH AT THE ASSESSEE HAS MADE TOTAL INVESTMENT OF RS.70,00,000/- (APPROX.) FOR TH E CONSTRUCTION OF BUILDING NAMED SHYAM ENCLAVE. CONSEQUENTLY, THE MATTER WAS REFERRED TO THE DVO. AS PER BOOKS OF ACCOUNT, DURING THE A.Y. 2005-06, T HE ASSESSEE HAS SHOWN INVESTMENT OF RS.30,11,527/- WHILE THE VALUATION OF FICER VALUED THE COST OF CONSTRUCTION AT RS.37,92,265/-. CONSEQUENTLY, THE DIFFERENCE OF RS.5,54,063/- AND RS.7,80,738/- FOR THE A.YS. 2005-06 AND 2006-07 RESPECTIVELY WAS ADDED TO THE INCOME OF THE ASSESSEE UNDER SECTION 69B OF THE ACT AS UNDISCLOSED INVESTMENT. 4 ITA NOS .176 & 175/BLPR/2011 A.YS. 2005-06 & 2006-07 4. ON APPEAL, THE LD. CIT(A) DELETED THE IMPUGNED A DDITIONS MADE ON THE BASIS OF THE INVESTMENT ESTIMATED BY THE DVO., AND HENCE THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 5. WE HAVE HEARD SHRI LAHIRI, LD. DEPARTMENTAL REPR ESENTATIVE AT LENGTH. WE HAVE ALSO CONSIDERED THE WRITTEN SUBMISSIONS FIL ED BY THE ASSESSEE (PAGES 1 TO 5 OF ASSESSEES PAPER BOOK). IN PARAGRAPH NO. 1.10 OF THE IMPUGNED ORDER, THE LD. CIT(A) HAS OBSERVED AS UNDER :- THE A.O. WAS NOT EMPOWERED TO INITIATE PROCEEDINGS UNDER SECTION 147 WHEN THE TIME OF ISSUANCE OF NOTICE UND ER SECTION 143(2) HAD NOT EXPIRED. FOR THE ASSESSMENT YEAR 20 05-06 THE ORIGINAL RETURN WAS FILED ON 31.03.2006 AND NO NOTI CE U/S. 143(2) WAS ISSUED WITHIN THE GIVEN TIME LIMIT. HEN CE REFERENCE MADE U/S. 142(A) ON 07.08.2007 AND ISSUE OF NOTICE U/S. 148 ON 13.12.2007, WERE UNLAWFUL. FOR THE A.Y. 2006-07 OR IGINAL RETURN WAS F ILED ON 29.03.2007 AND ALTHOUGH TIME F OR ISSUE OF NOTICE U/S. 143(2) HAD NOT EXPIRED, WITHOUT GIVING SUCH NOTICE WITHIN THE GIVEN TIME LIMIT, THE A.O. ISSUED NOTICE U/S. 148 ON 07.01.2008, ON THE BASIS OF THE UNLAWFUL REPORT OBT AINED FROM DVO ON 07.08.2007 (RECEIVED ON 30.11.2007). HENCE, THE IMPUGNED INITIATION OF PROCEEDINGS, FOR BOTH THE AS SESSMENT YEARS, UNDER CONSIDERATION, IN MY CONSIDERED VIEW, WERE UNLAWFUL. 5.1 LD. CIT(A) ALSO OBSERVED THAT THE YEAR-WISE INV ESTMENT IN CONSTRUCTION OF THE IMPUGNED PROPERTY, REFLECTED IN THE BALANCE SHEET FILED WITH THE ORIGINAL RETURN, WAS ACCEPTED AND NO NOTICE UNDER S ECTION 143(2) OF THE ACT WAS ISSUED WITHIN THE PRESCRIBED TIME LIMIT. THUS, THERE WAS COMPLETE 5 ITA NOS .176 & 175/BLPR/2011 A.YS. 2005-06 & 2006-07 DISCLOSURE OF THE FACTS RELATING TO INVESTMENT MUCH EARLIER TO THE DATE OF INITIATION OF ACTION UNDER SECTION 147 OF THE ACT. HENCE, THERE WAS NO OMISSION OF NON-DISCLOSURE ON THIS SCORE SO AS TO J USTIFY INITIATION OF PROCEEDINGS UNDER SECTION 147 OF THE ACT. IN OUR OPINION, THE LD. CIT(A) HAS CORRECTLY OBSERVED THAT INITIATION OF PROCEEDINGS U NDER SECTION 147 FOR BOTH THE A.YS. UNDER CONSIDERATION ARE NOT TENABLE IN LA W. 5.2 THERE IS ANOTHER ASPECT OF THE MATTER I.E. ON T HE DATE WHEN THE A.O. REFERRED THE MATTER TO THE DVO UNDER SECTION 142A O N 07.08.2007, THERE WAS NO INFORMATION OR MATERIAL IN THE POSSESSION OF THE A.O. FOR FORMATION OF BELIEF OF ESCAPEMENT OF INCOME. AS PER THE REASONS RECORDED BY THE AO, IT IS CLEAR THAT THE A.O. OPINED THAT AS PER THE ESTIMATI ON OF THE D.V.O., THE INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. THUS, IT IS CLEAR THAT THE REASONS RECORDED WERE MERELY FOR ASSESSING THE PRESUMED UNE XPLAINED INVESTMENT IN CONSTRUCTION ON THE BASIS OF ESTIMATION OF DVO AND THERE WAS NO OTHER MATERIAL AVAILABLE ON RECORD FOR FORMATION OF BELIE F OF ESCAPEMENT OF INCOME. IN OUR OPINION, THE ASSUMPTION OF JURISDICTION ON T HE 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 ASSESSMENT . THE A.O. HAS NOT BROUGHT ANY CORROBORATIVE EVIDENCE ON RECORD TO EST ABLISH ESCAPEMENT OF 6 ITA NOS .176 & 175/BLPR/2011 A.YS. 2005-06 & 2006-07 ASSESSMENT EXCEPT THE VALUATION REPORT OF DVO WHICH IS AN OPINION AND NOT AN EVIDENCE. IT IS WELL SETTLED LAW THAT THE ASSES SMENT CANNOT BE REOPENED MERELY ON THE BASIS OF THE REPORT OF THE DVO. ADMI TTEDLY, IN THIS CASE, THE SOLE GROUND FOR REOPENING OF ASSESSMENT WAS THAT TH E VALUATION OFFICER HAD DETERMINED THE COST OF CONSTRUCTION AT A HIGH RATE THAN THAT SHOWN BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT. THE REASONS RECO RDED BY THE A.O. FOR REOPENING OF THE ASSESSMENT DO NOT DEMONSTRATE THAT HE HAD APPLIED HIS MIND TO THE FACTS OF THE CASE TO ASCERTAIN AS TO WHETHER , IN FACT, THE ASSESSEE HAD INVESTED MORE AMOUNT TOWARDS CONSTRUCTION OF BUILDI NG AS STATED IN THE VALUATION REPORT. IN THE CASE OF ACIT VS. DHARIYA CONSTRUCTION CO. (2010) 328 ITR 515 (SC), THE HONBLE SUPREME COURT HAS RUL ED THAT THE OPINION OF THE DVO PER SE IS NOT AN INFORMATION FOR THE PURPOS ES OF REOPENING THE ASSESSMENT UNDER SECTION 147 OF THE INCOME TAX ACT, 1961. THE HONBLE SUPREME COURT FURTHER OBSERVED THAT THE A.O. HAS TO APPLY HIS MIND TO THE INFORMATION, IF ANY, COLLECTED AND MUST FORM A BELI EF THEREON. ACCORDINGLY, THE HONBLE SUPREME COURT HELD THAT THE REVENUE WAS NOT ENTITLED TO REOPEN THE ASSESSMENT. IN OUR VIEW, THE JUDGEMENT OF HON BLE SUPREME COURT REFERRED TO ABOVE IS SQUARELY APPLICABLE TO THE FAC TS OF THE PRESENT CASE AND, THEREFORE, WE DO NOT SEE ANY INFIRMITY IN THE FINDI NGS OF THE LD. CIT(A). 7 ITA NOS .176 & 175/BLPR/2011 A.YS. 2005-06 & 2006-07 5.3 IT IS ALSO WELL SETTLED LAW THAT WITHOUT REJECT ING THE BOOKS OF ACCOUNT THE A.O. CANNOT REFER THE MATTER TO THE DVO. ADMIT TEDLY, IN THIS CASE, THE ASSESSEE HAS MAINTAINED BILLS AND VOUCHERS PERTAINI NG TO COST OF MATERIAL USED FOR THE CONSTRUCTION OF BUILDING. FURTHERMORE, THE RE WAS NO EVIDENCE IN THE POSSESSION OF THE A.O. TO COME TO A CONCLUSION THAT YEAR-WISE INVESTMENT DISCLOSED IN THE ENCLOSURES FILED ALONG WITH THE RE TURNS FOR THE A.YS. UNDER CONSIDERATION WAS SUPPRESSED BY THE ASSESSEE. THE ASSESSEE ALSO SUBMITTED THE VALUATION REPORT OBTAINED FROM THE REGISTERED V ALUER BEFORE THE A.O. WHEREIN THE VALUATION DONE BY THE REGISTERED VALUER SUPPORTS THE YEAR-WISE INVESTMENT SHOWN BY THE ASSESSEE. IN OUR OPINION, WITHOUT REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE, THERE WAS NO JUST IFICATION IN REFERRING THE MATTER TO THE DVO UNDER SECTION 142A OF THE ACT. W HILE TAKING SUCH A VIEW, WE ARE FULLY FORTIFIED BY THE DECISION OF HONBLE S UPREME COURT OF INDIA IN THE CASE OF SARGAM CINEMA VS. CIT (2010) 328 ITR 51 3 (SC). THE QUESTION BEFORE THE HONBLE SUPREME COURT WAS THAT AS TO WHE THER AN ASSESSING AUTHORITY CAN REFER ANY MATTER TO THE DEPARTMENTAL VALUATION OFFICER UNDER SECTION 142A OF THE ACT WITHOUT REJECTING THE BOOKS OF ACCOUNT. THE HONBLE SUPREME COURT ANSWERED THE QUESTION IN NEGATIVE. T HE HONBLE SUPREME COURT HELD THAT THE A.O. COULD NOT HAVE REFERRED TH E MATTER TO THE DVO WITHOUT THE BOOKS OF ACCOUNT BEING REJECTED. IN TH E INSTANT CASE, WE HAVE 8 ITA NOS .176 & 175/BLPR/2011 A.YS. 2005-06 & 2006-07 ALREADY OBSERVED HEREINABOVE THAT THE A.O. HAS REFE RRED THE MATTER TO THE DVO WITHOUT REJECTING THE BOOKS OF ACCOUNT MAINTAIN ED BY THE ASSESSEE AND, THEREFORE, THE REFERENCE UNDER SECTION 142A TO THE DVO WAS BAD IN LAW, AND HENCE NOT TENABLE. ON THIS SCORE ALONE, THE REOPEN ING OF THE ASSESSMENT FOR THESE TWO YEARS IS NOT VALID. 6. IN VIEW OF THE ABOVE, WE HOLD THAT THE REOPENING OF THE ASSESSMENTS FOR BOTH THE A.YS. UNDER CONSIDERATION WAS NOT VALID AN D, THEREFORE, WE DO NOT SEE ANY INFIRMITY IN THE ORDER OF LD. CIT(A) ON THI S ISSUE. ACCORDINGLY, WE UPHOLD THE ORDER OF LD. CIT(A) AND DISMISS BOTH TH E APPEALS OF THE REVENUE. 7. IN THE RESULT, BOTH THE APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 17.12.2014. SD/- SD/- (RAJENDRA) (H.L. KARWA) ACCOUNTANT MEMBER PRESIDENT RAIPUR, DATED: 17.12.2014 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// 9 ITA NOS .176 & 175/BLPR/2011 A.YS. 2005-06 & 2006-07 BY ORDER ASSTT. REGISTRAR, ITAT, RAIPUR