(Late) T.R.V.Selvaraj Represented by Legal heirs (1) Suseela (2) Sri Ramesh, CHENNAI V. ITO, Cuddalore

ITA 1819/CHNY/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61068 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 30-04-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 26-10-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K E B RENGARAJAN JR
• Assessee Lawyers: M SWAMINATHAN
• Keywords: Valuation report
• Section: 148; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI BEFORE SHRI ABRAHAM P.GEORGE, ACCOUNTANT ME MBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ITA NO.1819/MDS/2010 (ASSESSMENT YEAR: 2006-07) (1)SMT. SUSEELA (2)SHRI RAMESH LEGAL HEIRS OF (LATE) T.R.V.SELVARAJ, C/O.M.SWAMINATHAN, NOTARY 52, AVM AVENUE, 1 ST MAIN ROAD VIRUGAMBAKKAM, CHENNAI-600 092. PAN:AUGPS 3727E VS. INCOME TAX OFFICER, WARD I(4), CUDDALORE. (APPELLANT) (RESPONDENT) APPELLANT BY : MR. M.SWAMINATHAN, ADVOCATE RESPONDENT BY : MR. K.E .B.RENGARAJAN, JR. STANDING COUNSEL DATE OF HEARING : 30 TH APRIL, 2012 DATE OF PRONOUNCEMENT : 30 TH APRIL, 2012 O R D E R PER VIKAS AWASTHY, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT, PONDICHERRY PASSED UNDE R SECTION 263 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERR ED TO AS THE ACT) DATED 19.08.2010. 2. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2006-07 ON 20.10.2006 ADMITTING TOT AL INCOME OF ` 33,13,440/- AND CLAIMED REFUND OF ` 1,77,242/-. A ITA NO. 1819/MDS/2010 2 SURVEY WAS CONDUCTED IN THE PREMISES OF THE ASSESSE E ON 9.1.2008 AND NOTICE UNDER SECTION 148 WAS ISSUED TO THE ASSESSEE ON THE GROUND THAT THE COST OF CONSTRUCTIO N OF MARRIAGE HALL WAS NOT PROPERLY RETURNED. THE ASSES SING OFFICER REFERRED THE MATTER TO THE DVO ON 18.11.200 8 TO ASSESS THE VALUE OF MARRIAGE HALL. THE DVO SUBMITTE D VALUATION REPORT ON 12.1.2009. SINCE THE ASSESSMENT WAS TO BE COMPLETED ON OR BEFORE 31.12.2008, THE ASSESSING OFFICER PASSED THE ASSESSMENT ORDER ON 29.12.2008 ON THE BA SIS OF COST OF CONSTRUCTION OF MARRIAGE HALL AS RETURNED B Y THE ASSESSEE AT ` 65,85,000/-. SUBSEQUENTLY, ON RECEIPT OF REPORT OF THE DVO, THE CIT ISSUED NOTICE UNDER SECTION 26 3 ON 8.6.2010 TO THE ASSESSEE. THE DVO ASSESSED THE COS T OF CONSTRUCTION OF MARRIAGE HALL AS ` 1,09,90,000/- . THE ASSESSEE FILED REPLY TO THE NOTICE ON 9.10.2010. TH E OBJECTION FILED BY THE ASSESSEE WAS REJECTED BY THE CIT AND H E PASSED ORDER UNDER SECTION 263 WITH THE FOLLOWING OBSERVAT IONS:- 5. I HAVE CAREFULLY CONSIDERED THE ISSUE. SECTION 263(1)(B) DEFINES WHAT IS RECORD BEFORE THE COMMISSIONER U/S.263 OF THE I.T.ACT. ACCORDING TO THIS SECTION, RECORD INCLUDES AND SHALL BE ITA NO. 1819/MDS/2010 3 DEEMED ALWAYS TO HAVE INCLUDED ALL RECORDS RELATING TO ANY PROCEEDING UNDER THIS ACT AVAILABLE AT THE TIME OF EXAMINATION BY THE COMMISSIONER. THEREFORE, EVEN THOUGH THE VALUATION REPORT OF THE DVO WAS NOT AVAILABLE BEFORE THE ASSESSING OFFICER AT THE TIME OF MAKING THE ASSESSMENT, THIS REPORT WOULD FORM PART OF THE RECORD OF THE COMMISSIONER DURING THE PROCEEDINGS U/S.263. IT IS CLEAR THAT ON EXAMINATION OF THE RECORD (WHICH INCLUDES THE VALUATION REPORT) THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS AS HE HAS CONCEDED THE COST OF CONSTRUCTION OF THE MARRIAGE HALL AT ` 65,85,000/- AS AGAINST ` 1,09,90,000/- ESTIMATED BY THE DVO. IT IS ALSO OBVIOUS THAT THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER IS PREJUDICIAL TO THE INTEREST OF THE REVENUE SINCE THE DIFFERENCE BETWEEN THE COST OF CONSTRUCTION SHOWN BY THE ASSESSEE AND THE COST OF CONSTRUCTION ESTIMATED BY THE DVO VIZ (1,09,90,000 65,85,000) = ` 44,05,000/- HAS NOT BEEN BROUGHT TO TAX. THE SECOND ARGUMENT OF THE ASSESSEE ALSO CANNOT BE ACCEPTED AS THE ASSESSING OFFICER DID NOT GIVE A CERTIFICATE TO THE ASSESSEE THAT DETAILS OF COST OF CONSTRUCTION MENTIONED IN THE BOOKS ARE CORRECT AS IF THAT WERE THE CASE, THE ASSESSING OFFICER WOULD NOT HAVE ITA NO. 1819/MDS/2010 4 REFERRED THE ISSUE TO THE DVO. IN THESE CIRCUMSTANCES, I REJECT THE OBJECTIONS AND DIRECT T HE ASSESSING OFFICER TO ADOPT THE SUM OF ` 1,09,90,000/- AS THE COST OF CONSTRUCTION OF MARRIAGE HALL, RECOMPUTE THE TOTAL INCOME AND TAX AND REPORT THE COMPLIANCE WITHIN ONE MONTH FROM THE DATE OF RECEIPT OF THIS ORDER. 3. AGGRIEVED AGAINST THE ORDER OF THE CIT, THE ASSE SSEE HAS PREFERRED THE PRESENT APPEAL. SHRI M.SWAMINATHA N, ADVOCATE APPEARING ON BEHALF OF THE ASSESSEE SUBMIT TED THAT SINCE AT THE TIME OF MAKING ADJUSTMENT, THE ASSESSI NG OFFICER WAS NOT IN POSSESSION OF VALUATION REPORT. THEREFOR E, THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER CA NNOT BE TERMED AS ERRONEOUS. HE FURTHER SUBMITTED THAT THE ASSESSING OFFICER DID NOT REJECT THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT WITH OUT THE REPORT OF THE DVO, NOW, THE CIT CANNOT TERM THE O RDER OF THE ASSESSING OFFICER AS ERRONEOUS. HE FURTHER CONTENDE D THAT THE CIT CANNOT GIVE DIRECTIONS TO THE ASSESSING OFFICER TO INCLUDE CERTAIN SUM WHILE RECOMPUTING THE TOTAL INCOME AND TAX THEREON. HE RELIED ON THE JUDGEMENT OF HONBE MADRA S HIGH ITA NO. 1819/MDS/2010 5 COURT IN CIT VS. SMT. TASNEEM Z.MADRASWALA, REPORTE D AS 324 ITR 67 TO SUPPORT HIS CONTENTION THAT CIT HAS N O POWER TO DIRECT THE ASSESSING OFFICER TO COMPLETE ASSESSMENT IN A PARTICULAR MANNER. 4. ON THE OTHER HAND, SHRI K.E.B.RANGARAJAN, COUNSE L APPEARING ON BEHALF OF THE DEPARTMENT SUBMITTED THA T THE ORDER PASSED BY THE CIT IS ABSOLUTELY CORRECT AND W ELL REASONED ORDER. HE VEHEMENTLY SUPPORTED THE ORDER P ASSED BY THE CIT. IN ORDER TO SUPPORT HIS CASE, HE RELIED ON THE JUDGEMENT PASSED BY THE HONBLE SUPREME COURT OF IN DIA IN THE CASE OF CIT VS. SHREE MANJUNATHESWARE PACKING PRODUCTS AND CAMPHOR WORKS REPORTED AS 231 ITR 53. 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE PARTIE S AND HAVE GONE THROUGH THE ORDERS PASSED BY THE ASSE SSING OFFICER AND THE CIT. WE HAVE ALSO EXAMINED THE JUDG EMENTS REFERRED TO BY THE RESPECTIVE PARTIES. A PERUSAL OF THE RECORD SHOWS THAT DVO HAS GIVEN VALUATION REPORT AFTER THE DATE OF ASSESSMENT ORDER I.E. 29.12.2008. THE ASSESSING OFF ICER WAS CONSTRAINED TO PASS THE ASSESSMENT ORDER BEFORE THE DUE ITA NO. 1819/MDS/2010 6 DATE I.E. 31.12.2008. SINCE, AT THE TIME OF PASSIN G OF ASSESSMENT ORDER DVOS VALUATION REPORT WAS NOT AVA ILABLE WITH THE ASSESSING OFFICER HE ACCEPTED THE COST O F CONSTRUCTION AS RETURNED BY THE ASSESSEE. THE VALUA TION REPORT SHOWS CONSIDERABLE DIFFERENCE BETWEEN THE CO ST OF CONSTRUCTION RETURNED BY THE ASSESSEE AND THE VALUA TION MADE BY THE DVO. THE CONTENTION OF THE ASSESSEE THA T THE ASSESSING OFFICER HAD ACCEPTED THE BOOKS OF ACCOUNT IS NOT TENABLE. HAD IT BEEN A CASE, THE ASSESSING OFFICER WOULD NOT HAVE ASKED FOR THE REPORT OF DVO. WHILE ACCEPTING THE COST OF CONSTRUCTION AS RETURNED BY THE ASSESSEE, ASSES SING OFFICER DID NOT INTEND TO ACCEPT THE BOOKS OF A CCOUNT AS ALLEGED BY THE ASSESSEE. THE ASSESSING OFFICER WAS CONSTRAINED TO ACCEPT THE COST OF CONSTRUCTION FURN ISHED BY THE ASSESSEE AS THE VALUATION REPORT OF THE DVO WAS NOT AVAILABLE WITH HIM AT THE TIME OF PASSING OF THE AS SESSMENT ORDER. 6. A PERUSAL OF SECTION 263 OF THE ACT REVEALS THAT FOLLOWING TWO CONDITIONS HAVE TO BE SATISFIED BEFORE THE COMM ISSIONER INVOKES THE PROVISIONS OF SECTION 263:- ITA NO. 1819/MDS/2010 7 I) THE ORDER OF THE ASSESSING OFFICER SOUGHT TO BE REVISED IS ERRONEOUS; & II) IT IS PREJUDICIAL TO THE INTERESTS OF THE REVEN UE. IN THE PRESENT CASE BOTH THE CONDITIONS ARE SATISFI ED. THE ORDER OF THE ASSESSING OFFICER WHICH IS SOUGHT TO B E REVISED IS ERRONEOUS AS IT HAS NOT TAKEN INTO CONSIDERATION TH E VALUATION REPORT OF THE DVO AND AT THE SAME TIME, IT IS PREJU DICIAL TO THE INTERESTS OF THE REVENUE AS THE DIFFERENCE BETWEEN THE COST OF CONSTRUCTION RETURNED BY THE ASSESSEE AND AS ASSESS ED BY THE DVO IS MORE THAN ` 44.00 LAKHS. THE CONTENTION OF THE ASSESSEE THAT ONLY THOSE RECORDS ARE TO BE TAKEN IN TO CONSIDERATION WHICH ARE AVAILABLE AT THE TIME OF AS SESSMENT IS NOT VALID. EXPLANATION (B) TO SUB-SECTION (1) OF SE CTION 263 CLEARLY PROVIDES THAT RECORD SHALL INCLUDE AND SHALL BE DEEMED ALWAYS TO HAVE INCLUDED ALL RECORDS RELATING TO ANY PROCEEDING UNDER THIS ACT AVAILABLE AT THE TIME OF EXAMINATION BY THE COMMISSIONER. THE AFORESAID SAID EXPLANATION TO SUB- SECTION (1) WAS INTRODUCED BY FINANCE ACT, 1989 WIT H EFFECT FROM 1.6.1988. THE AMENDMENT WAS MADE TO DISPEL THE NARROW INTERPRETATION OF THE WORD RECORD. IT IS N OT JUSTIFIED IN ITA NO. 1819/MDS/2010 8 VIEW OF THE OBJECT OF THE PROVISION AND THE NATURE AND SCOPE OF THE POWER CONFERRED UPON THE COMMISSIONER, TO N ARROW DOWN THE INTERPRETATION OF THE WORD RECORD. THE REVISIONAL POWER OF THE COMMISSIONER UNDER SECTION 263 ENABLES THE COMMISSIONER TO CALL FOR AND EXAMINE THE RECORDS OF ANY PROCEEDING UNDER THE ACT. THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF SHREE MANJUNATHESWARE PACKING PRODUCTS AND CAMPHOR WORKS (SUPRA) HAS HELD AS UNDE R:- . IN THE APPEAL FILED BY THE ASSESSEE, THE ORDER OF THE COMMISSIONER WAS CHALLENGED, INTER ALIA, ON THE GROUND THAT THE POWER U/S.263 COULD HAVE BEEN INVOKED ON THE BASIS OF THE RECORD AS IT STOOD WHEN THE ORDER WAS PASSED BY THE INCOME TAX OFFICER AND THAT IT WAS NOT OPEN TO THE COMMISSIONER TO TAKE INTO ACCOUNT THE DISSOLUTION OF THE ASSESSEE FIRM WHICH TOOK PLACE AFTER THE PASSING OF THE ASSESSMENT ORDER, BECAUSE THAT CIRCUMSTANCE WAS NOT DISCLOSED BY THE RECORD WHICH WAS BEFORE THE INCOME TAX OFFICER. REJECTING THIS CONTENTION, THIS COURT HELD (PAGE 662) AS REGARDS HIS TAKING INTO CONSIDERATION AN EVEN WHICH HAD OCCURRED SUBSEQUENT TO THE PASSING OF THE ORDER BY THE INCOME TAX OFFICER, IT MAY BE STATED IN EXPLANATION (B) IN SECTION 263 THERE IS AN EXPRESS PROVISION ITA NO. 1819/MDS/2010 9 WHEREIN IT IS PRESCRIBED THAT RECORD SHALL INCLUDE AND SHALL BE DEEMED ALWAYS TO HAVE INCLUDED ALL RECORDS RELATING TO ANY PROCEEDING UNDER THIS ACT AVAILABLE AT THE TIME OF EXAMINATION BY THE COMMISSIONER. THE DEATH OF ONE OF THE TWO PARTNERS RESULTING IN THE DISSOLUTION OF THE ASSESSEE FIRM ON ACCOUNT OF SUC H DEATH TOOK PLACE PRIOR TO THE PASSING OF THE ORDER BY THE COMMISSIONER AND IT COULD, THEREFORE, BE TAKEN INTO CONSIDERATION BY HIM FOR THE PURPOSE OF EXERCISING HIS POWERS U/S.263 OF THE ACT. IN THAT CASE ALSO THE AMENDMENT WAS HELD APPLICABLE TO AN ORDER PASSED BEFORE JUNE 1, 1988. WE, THEREFORE, HOLD THAT IT WAS OPEN TO THE COMMISSIONER TO TAKE INTO CONSIDERATION ALL THE RECORDS AVAILABLE AT THE TIME OF EXAMINATION BY HIM AND THUS TO CONSIDER THE VALUATION REPORT SUBMITTED BY THE DEPARTMENT VALUATION CELL SUBSEQUENT TO THE PASSING OF THE ASSESSMENT ORDER AND SO THE ORDER PASSED BY HIM WAS LEGAL. THE HIGH COURT WAS WRONG IN TAKING A CONTRARY VIEW. WE, THEREFORE, ALLOW THI S APPEAL, SET ASIDE THE JUDGEMENT AND ORDER PASSED BY THE HIGH COURT AND ANSWER THE QUESTION REFERRED TO THE HIGH COURT IN NEGATIVE, I.E. IN FAVOUR OF TH E REVENUE AND AGAINST THE ASSESSEE. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, THERE SHALL BE NO ORDER AS TO COSTS. ITA NO. 1819/MDS/2010 10 7. IN THE INSTANT CASE, THE COMMISSIONER INITIATED THE PROCEEDINGS UNDER SECTION 263 OF THE ACT AGAINST TH E ASSESSEE ON THE BASIS OF DVOS VALUATION REPORT. AL THOUGH THE SAID REPORT WAS NOT AVAILABLE TO THE ASSESSING OFFICER AT THE TIME OF PASSING ASSESSMENT ORDER BUT THE REPORT WAS AVAILABLE TO THE COMMISSIONER AT THE TIME OF ISSUAN CE OF NOTICE UNDER SECTION 263 OF THE ACT AND THE REPORT OF DVO IS A PART OF THE RECORD. ON THE BASIS OF THE RECORD ( DVOS VALUATION REPORT) THE CIT HAS RIGHTLY HELD THAT THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO T HE INTERESTS OF THE REVENUE. AS PER THE CONTENTION OF THE A.R., CIT CANNOT DIRE CT THE ASSESSING OFFICER TO COMPLETE THE ASSESSMENT IN PAR TICULAR MANNER. TO SUPPORT HIS CONTENTION HE RELIED ON THE JUDGEMENT OF THE HONBLE MADRAS HIGH COURT IN THE C ASE OF TASNEEM Z MADRASWALA (SUPRA). WE DO NOT FIND ANY FO RCE IN THIS SUBMISSION OF THE A.R . IN THE PRESENT CASE TH E CIT HAS ONLY DIRECTED THE ASSESSING OFFICER TO TAKE INTO CO NSIDERATION THE COST OF CONSTRUCTION AS PER DVOS REPORT WHICH WAS EARLIER NOT AVAILABLE TO THE ASSESSING OFFICER AND RECOMPU TE THE ITA NO. 1819/MDS/2010 11 TOTAL INCOME AND TAX THEREON. IT IS NOT THE CASE WH ERE THE CIT HAS DIRECTED THE ASSESSING OFFICER TO COMPLETE THE ASSESSMENT IN A PARTICULAR MANNER. THUS, THE RATIO LAID DOWN IN THE CASE LAW RELIED UPON BY THE A.R. DOES NOT AP PLY INT EH FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. 8 . IN VIEW OF THE ABOVE, WE ARE OF THE CONSIDERED OPIN ION THAT THE ORDER PASSED BY THE COMMISSIONER IS ABSOL UTELY VALID AND JUSTIFIED. NO INTERFERENCE IN THE ORDER PASSED BY THE CIT IS CALLED FOR. WE, THEREFORE, UPHOLD THE ORDER PASSED BY THE COMMISSIONER AND DISMISS THE APPEAL OF THE ASSESSEE . 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON MONDAY, THE 30 TH OF APRIL, 2012 AT CHENNAI. SD/- SD/- (ABRAHAM P.GEORGE) (VIKAS AWASTHY) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 30 TH APRIL, 2012. SOMU COPY TO: (1) APPELLANT (4) CIT(A) (2) RESPONDENT (5) D.R. (3) CIT (6) G.F.