Jay Farm House, CHENNAI V. ACIT, CHENNAI

ITA 306/CHNY/2011

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8092 (ITAT-CHENNAI)
• Duration Of Justice: 5 year(s) 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 19-08-2016
• Assessment Year: 1995-1996
• Appeal Filed On: 21-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T R SENTHIL KUMAR
• Keywords: Unexplained investment; Value adopted by valuation officer; Opportunity of being heard; Retrospective amendment; Question of law; Valuation report
• Section: 143(3); 142(1); 260A; 69

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI , ! ' . # , $ %& BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER /I.T.A.NO.306, 307, 308 & 309 /MDS/2011 / ASSESSMENT YEAR : 1995-96, 1996-97, 1997-98 & 2003- 04 JAY FARM HOUSE, NO.18, BALAMUTHUKRISHNAN STREET, T.NAGAR, CHENNAI 600 017. PAN: AAB FJ 6822 G ( /APPELLANT) V. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE II(2), CHENNAI 600 034. ( /RESPONDENT) /APPELLANT BY : SHRI G.SEETHARAMAN, CHARTERED A CCOUNTANT /RESPONDENT BY : SHRI T.R.SENTHIL KUMAR, STANDING COUNSEL /DATE OF HEARING : 23.08.2016 /DATE OF PRONOUNCEMENT : 16.11.2016 ' /O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER ITA NOS. 306, 307 & 308/MDS/2011 ARE THE APPEALS BY THE ASSESSEE DIRECTED AGAINST THE COMMON ORDER OF CIT(A) DATED 15.11.2010 FOR THE I.T.A. NOS.306, 307, 308 & 309/MDS/2011 2 ASSESSMENT YEARS 1995-96, 1996-97 & 1997-98, WHEREIN, THE ASSESSEE CHALLEGENGED THE SUSTAINING OF ADDITIONS MADE TOWAR DS THE COST OF CONSTRUCTION IN RESPECT OF INJAMBAKKAM PROPERY AND SHOLINGANALLUR P ROPERTY. 2. ITA NO.309/MDS/2011 IS ALSO APPEAL BY THE ASSESS EE DIRECTED AGAINST THE ORDER OF CIT(A) DATED 12.11.2000 FOR TH E ASSESSMENT YEAR 2003-04, WHEREIN THE ASSESSEE CHALLENGING THE LEVY OF PENALTY UNDER SECTION 271(1)(B) OF THE INCOME TAX ACT AT RS.10,00 0/-. FIRST WE TAKEUP THE ASSESSEES APPEALS IN ITA NOS. 306, 307 & 308/MDS/2011 3. THE FACTS OF THE CASE ARE THAT IN THE ASSESSMENT ORDERS FOR THE ASSESSMENT YEAR 1995-96, 1996-97 AND 1997-98, THE C OST OF CONSTRUCTION OF PROPERTY OF THE APPELLANT AT 1/240, EAST COAST R OAD, INJAMBAKKAM WAS TAKEN AT RS.82.29 LAKHS AND THE COST OF CONSTRUCTIO N OF APARTMENT AT SHOLINGANALLUR WAS TAKEN AT RS.117.45 LAKHS, INVEST ED OVER A PERIOD OF 3 YEARS. (F.Y. 1994-95 TO 1996-97). AFTER CONSIDERING THE INVESTMENT OF RS.61.78 LAKHS IN INJAMBAKKAM PROPERTY AND RS.27 LA KHS IN SHOLINGANALLUR PROPERTY RETURNED BY THE APPELLANT, THE BALANCE OF RS.110.96 LAKHS WAS TREATED AS UNDISCLOSED INVESTMENT IN THE PROPERTIES , 1/3 RD OF THIS AMOUNT I.T.A. NOS.306, 307, 308 & 309/MDS/2011 3 (RS.36,98,660/-) WAS TREATED AS UNEXPLAINED INVESTM ENT IN EACH OF THE ASSESSMENT YEARS (A.YS. 1995-96, 1996-97 & 1997-98) AND ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT IN CONSTRUCTION W AS ACCORDINGLY MADE FOR THESE ASSESSMENT YEARS. 4. AGGRIEVED BY THE ADDITIONS, THE APPELLANT PREFER RED APPEALS AGAINST THE ASSESSMENT ORDERS BEFORE CIT(A). 5. THE APPEAL FOR A.Y. 1997-98 WAS DECIDED BY THE C IT(A)-II (ORDER DATED 14.02.2003 IN ITA NO.60/2001-02) IN WHICH THE TOTAL COST OF CONSTRUCTION WAS DETERMINED BY THE CIT(A) AS BELOW: (1) PROPERTY AT INJAMBAKKAM : RS.74.36 LAKHS (2) PROPERTY AT SHOLINGANALLUR : RS.102.95 LAKHS 5.1 ON FURTHER APPEAL BY THE APPELLANT, THE TRIBUNA L IN ITS ORDER DATED 30.03.2004 IN ITA NO.1159/MDS/2003 SET ASIDE THE OR DER OF THE CIT(A) AND REMITTED THE MATTER TO THE FILE OF THE A.O. AS BELOW: . IN VIEW OF THE JUDGMENT RELIED UPON BY THE LEAR NED ASSESSEES REPRESENTATIVE IN THE CASE OF SMT. AMIYA BALA PAUL (SUPRA), THE A.O COULD NOT REFER THE CASE TO DVO FOR FINDING THE COST OF CONSTRUCTION. THEREFORE, THE AS SESSING OFFICER CANNOT BASE HIS ASSESSMENT SOLELY ON THE BASIS OF THE REPORT OF THE DVO, BUT THIS CAN ONLY BE USED AS A I.T.A. NOS.306, 307, 308 & 309/MDS/2011 4 PIECE OF SUPPORTIVE MATERIAL AND THE ASSESSING OFFI CER SHOULD INDEPENDENTLY MAKE HIS OWN APPRAISAL OF THE COST OF CONSTRUCTION AND DETER MINE THE UNEXPLAINED INVESTMENT. IN VIEW OF THIS RULING, THE ACTION OF THE AUTHORITIES BELOW IS NOT JUSTIFIED. HENCE, WE REMIT THIS MATTER BACK TO THE FILE OF THE ASSESSING OFFIC ER WITH A DIRECTION THAT HE SHALL MAKE INDEPENDENT ENQUIRY AND OWN APPRAISAL REGARDING THE COST OF CONSTRUCTION CONSIDER THE DVO REPORT SUPPORTIVE DOCUMENT AND NOT AS PRIMARY M ATERIAL TO DETERMINE THE COST OF CONSTRUCTION AND ARRIVE AT THE QUANTUM OF UNEXPLAIN ED INVESTMENT IN BUILDINGS. REGARDING INVOKING THE PROVISIONS OF SECTION 69A OF THE I.T.ACT, THE ASSESSING OFFICER IS WITHIN HIS JURISDICTION AS HE HAS FOUND UNEXPLAINED INVESTMENT IN THE CONSTRUCTION OF BUILDINGS AND THE EXPLANATION OFFERED BY THE ASSESS EE WAS NOT SATISFACTORY AND HENCE, THE UNEXPLAINED INVESTMENT SHALL BE DEEMED TO BE IN COME OF THE ASSESSEE REGARDING THE PERIOD OF CONSTRUCTION, THE ASSESSING OFFICER SHALL ASCERTAIN FROM THE CURRENT ACCOUNT MAINTAINED BY THE ASSESSEE FOR DRAW AL OF MONEY FOR THE PURPOSE OF CONSTRUCTION AND ALSO FROM BILLS AND VOUCHERS PERTA INING TO CONSTRUCTION OF THESE BUILDINGS. 5.2 AS PER THE ORDERS OF THE HONBLE ITAT, THE APPE LLANT WAS GIVEN AN OPPORTUNITY AND WAS ASKED TO FURNISH THE ORIGINAL B ILLS AND VOUCHERS IN SUPPORT OF CONSTRUCTION OF THE BUILDINGS, DATES OF COMMENCEMENT AND DATES OF COMPLETION OF CONSTRUCTION OF THE PROPERTI ES AND PRODUCE BOOKS OF ACCOUNTS AND OTHER DOCUMENTARY EVIDENCES IN SUPP ORT OF ITS CLAIM OF COST OF CONSTRUCTION. IN RESPONSE, THE APPELLANTS A.R. SUBMITTED TO THE A.O. THAT THE ENTIRE EXPENDITURE TOWARDS CONSTRUCTI ON WAS REFLECTED IN THE BOOKS OF ACCOUNTS. HE FURTHER SUBMITTED AS BELOW: WITH REFERENCE TO THE ABOVE, WE HAVE BEEN REQUESTE D TO STATE THAT THE PROPERTY HAS BEEN INSPECTED BY THE DVO IN 2000 AND IN NO STRETCH OF IMAGINATION IT CAN BE CONSTRUED THAT THE CONSTRUCTION WAS OVER IN 1995-96. THE ASSE SSEE HAS ALSO FILED SUBMISSIONS FILED I.T.A. NOS.306, 307, 308 & 309/MDS/2011 5 WITH THE COMMISSIONER OF INCOME TAX (APPEALS) ON E ARLIER REPRESENTATIONS. WE MAY ALSO INVITE YOUR KIND ATTENTION TO OUR LETTER DATED 23.08.2003, ADDRESSED TO YOUR PREDECESSOR. TAKING ALL THESE INTO CONSIDERATION, W E SUBMIT THAT THERE IS NO BASIS FOR ADDING BACK ANY SUM ON ACCOUNT OF THE UNACCOUNTED C OST OF CONSTRUCTION. 6. THE A.O. DETERMINED THE TOTAL COST OF CONSTRUCTI ON OF INJAMBAKKAM PROPERTY AT RS.80,00,000/- AND SHOLINGANALLUR PROPE RTY AT RS.1,00,00,000/- STATING THE FOLLOWING: ASSESSEES SUBMISSIONS AND SUBMISSIONS MADE BEFORE CIT(A) HAVE BEEN CAREFULLY CONSIDERED. IT IS SEEN FROM THE RECORDS THAT ASSESS EE CONSTRUCTED TWO BUILDINGS AT NO.2/1, B-3, SEASHELL AVENUE, SHOLINGANALLUR, CHENN AI AND AT GREEN POINT, NO.18/4A, INJAMBAKKAM, CHENNAI. DURING THE COURSE OF PRESENT PROCEEDINGS ASSESSEE FAILED TO FURNISH ANY DOCUMENTARY EVIDENCE AND FAILED TO REFU TE THE FINDINGS MADE IN THE VALUATION REPORT. ASSESSEE FAILED TO FURNISH THE OR IGINAL BILLS AND VOUCHERS IN SUPPORT OF CONSTRUCTION OF THE BUILDINGS, DATES OF COMMENCEMEN T AND DATES OF COMPLETION OF CONSTRUCTION OF THE ABOVE PROPERTIES. ASSESSEE FAIL ED TO PRODUCE BOOKS OF ACCOUNTS AND OTHER DOCUMENTARY EVIDENCES IN SUPPORT OF ITS CLAIM OF COST CONSTRUCTION. ASSESSEE FAILED TO FURNISH BILLS AND VOUCHERS AND OTHER DOCU MENTARY EVIDENCE, IN SUPPORT OF ITS CONTENTION ON THE PERIOD OF CONSTRUCTION OF THE PRO PERTY. ASSESSEE HAS NOT BROUGHT IN ANY FRESH DOCUMENTARY EVIDENCE TO REFUTE THE FINDIN GS MADE BY DVO AND CIT(A). DECISION OF THE SUPREME COURT IN THE CASE OF AMIYA BALA PAL (262 ITR 407) HAS BEEN CAREFULLY CONSIDERED. SEC. 142A INSERTED BY FINANCE ACT, 2004 REGARDING THE ESTIMATES BY VALUATION OFFICER WITH RETROSPECTIVE EFFECT FROM 15.11.1972. IN THE PRESENT CASE, THE REFERENCE FOR THE VALUATION WAS MADE IN 1999. INJAMBAKKAM PROPERTY: IT IS SEEN FROM THE RECORD THAT ASSESSEE ACCOUNTED RS.28.57 LAKHS AS ON 31.03.1997 TOWARDS COST OF CONSTRUCTION OF THE PROPERTY AT INJ AMBAKKAM. IT IS SEEN FROM THE RECORD THAT ASSESSEE CLAIMED REBATE TOWARDS DIRECT PURCHAS ES AND SELF SUPERVISION. HAVING REGARD TO ASSESSEES SUBMISSIONS, VALUATION REPORT FILED BY ASSESSEE, VALUATION REPORT AND REMAND REPORTS OF DVO, FINDINGS MADE BY ASSESSI NG OFFICER AND CIT(A), DIRECTIONS I.T.A. NOS.306, 307, 308 & 309/MDS/2011 6 OF ITAT AND IN VIEW OF THE FACT THAT CONTEMPORANEOU S EVIDENCE IS NOT PRODUCED BY ASSESSEE, TOTAL COST OF CONSTRUCTION OF ASSESSEES PROPERTY AT INJAMBAKKAM IS ESTIMATED AT RS.80,00,000/-. SHOLINGANALLUR PROPERTY: IN RESPECT OF SHOLINGANALLUR PROPERTY ASSESSEE ACCO UNTED RS.61,70,000/- AS ON 31.03.1997 TOWARDS COST OF CONSTRUCTION. IT IS SEEN FROM THE RECORD THAT ASSESSEE CLAIMED RELIEF TOWARDS ARCHITECT FEE, MARBLE FLOORI NG AND SERVICE INSTALLATIONS. HAVING REGARD TO ASSESSEES SUBMISSIONS, VALUATION REPORT FILED BY ASSESSEE, VALUATION REPORT AND REMAND REPORTS OF DVO, DETAILED FINDINGS MADE BY CIT(A), DIRECTIONS OF ITAT AND IN VIEW OF THE FACT THAT CONTEMPORANEOUS EVIDEN CE IS NOT PRODUCED BY ASSESSEE, TOTAL COST OF CONSTRUCTION OF ASSESSEES PROPERTY A T SHOLINGANALLUR IS ESTIMATED AT RS.1,00,00,000/-. 7. ON FURTHER APPEAL TO CIT(A), HE OBSERVED THAT TH E TOTAL COST OF CONSTRUCTION AS PER DVOS REPORT IS AS FOLLOWS: S.NO. NAME OF THE PROPERTY COST AS PER DVO (RS.) COST DISCLOSED BY ASSESSEE (RS.) 1. INJAMBAKKAM PROPERTY 80,000/- 28,76,000/- 2. SHOLINGANALLUR PROPERTY 1,00,00,000/- 61,71,000/- 7.1 SINCE ASSESSEE HAS DISCLOSED PARTIAL AMOUNT OF THE COST OF CONSTRUCTION OF THE ABOVE PROPERTY, THE CIT(A) DIRE CTED THE ASSESSING OFFICER TO CONSIDER THE BALANCE AMOUNT AS UNDISCLOS ED INVESTMENT FOR ASSESSMENT YEAR 1995-96 TO 1997-98 AT 1/3 RD OF UNDISCLOSED INVESTMENT FOR EACH OF THESE ASSESSMENT YEARS. AGAIN THIS ASSE SSEE IS IN APPEAL I.T.A. NOS.306, 307, 308 & 309/MDS/2011 7 BEFORE US FOR ALL THESE THREE ASSESSMENT YEARS. 7.2 THE LEARNED AR SUBMITTED THAT IN PROPER ACCOUNT S HAVE BEEN MAINTAINED AND COMPLETE DETAILS OF CONSTRUCTION HAV E BEEN FURNISHED. THE AO HAD NOT FOUND ANY OMISSION OR DISCREPANCY IN THE ACCOUNTS OR DETAILS FILED AND, HENCE, HE HAS NO JURISDICTION TO REFER T HE MATTER TO THE DEPARTMENT VALUATION OFFICER. 7.3 THE COST OF CONSTRUCTION HAS BEEN REFLECTED IN THE BOOKS OF ACCOUNTS. ALL THE BILLS AND VOUCHERS RELATING TO TH E CONSTRUCTION OF BOTH THE PROPERTIES ARE SUPPORTED BY PROPER VOUCHERS AND INVOICES AND THE SAME HAVE BEEN SUBMITTED TO THE AO, COPY ENCLOSED, WHICH WERE NEVER DISPUTED. IN THE ABSENCE OF ANY OTHER EVIDENCE TO T HE CONTRARY, ACCOUNTS AND BILLS SUBMITTED BY THE APPELLANT CANNOT BE REJE CTED, PARTICULARLY WHEN THE HONBLE TRIBUNAL HAD GIVEN SPECIFIC INSTRUCTION S. 7.4 ACCORDING TO AR THERE WERE VARIOUS DEFECTS IN T HE VALUATION REPORTS AS LISTED OUT IN THE FOLLOWING PARAGRAPHS UNDER THE RELEVANT PROPERTIES. PROPERTY NO.1: THERE WAS A FUNDAMENTAL MISTAKE IN THE DVO REPORT I N ASSUMING, I.T.A. NOS.306, 307, 308 & 309/MDS/2011 8 WITHOUT ANY BASIS, THAT THE BUILDING WAS CONSTRUCTE D DURING THE ASST,. YEARS 1995-96 TO 1997-98. THE CONSTRUCTION WAS HALF -WAY THROUGH WHEN IT WAS STOPPED IN OCTOBER 1996 AND RE-STARTED AGAIN IN 1998-99. 7.5 HE SUBMITTED THAT APPELLANTS APPROVED VALUER ( WHO HAD ACTUALLY VISITED THE SPOT IN OCT. 1996) HAS IN HIS REPORT DA TED 20.10.96 HAS ESTIMATED THE VALUE AT RS.28.30 LAKHS AS ON OCTOBER 1996, WHEN THE CONSTRUCTION WAS STOPPED, THIS FIGURE ALMOST AGREES WITH RS.28.57 LAKHS, REFLECTED IN THE BOOKS OF ACCOUNTS. 7.6 THE LEARNED AR SUBMITTED THAT THE FOLLOWING ARE THE DETAILS OF EXPENSES INCURRED DURING THE FINANCIAL YEARS 1998-9 9 AND 1999-00 FURNISHED TO AO VIDE LETTER DATED 13.03.2003, (ACCE PTED BY AO IN ASST. YEAR 1999-00 AND 2000-01) WHICH SHOULD ALSO HAVE BE EN TAKEN INTO ACCOUNT, PARTICULARLY WHEN THE HONBLE TRIBUNAL HAD DIRECTED THE AO TO DETERMINE THE YEAR OF CONSTRUCTION:- YEAR ENDED 31 ST MARCH RS. SOURCE 1999 13,00,000 FROM PARTNER BY CHEQUE 1999 4,75,125 ADVANCE FROM SASTRI NUTS & PLATES 2000 15,90,152 ADVANCE FROM SASTRI NUTS & PLATES DUE TO KRISHNAN, ENGINEER 1,42,748 PENDING BILLS DUE TO SREENIVASAN 1,56,000 PENDING BILLS I.T.A. NOS.306, 307, 308 & 309/MDS/2011 9 FOR SANITARY 36,64,425 7.7 ACCORDING TO AR, IF THESE ARE CONSIDERED, THE T OTAL COST OF CONSTRUCTION ACCOUNTED, WORKS OUT TO RS.65.21 LAKHS (28.57 + 36.64), AS AGAINST RS.74.36 LAKHS DETERMINED BY THE CIT(A) IN THE ORIGINAL ASSESSMENT PROCEEDINGS AND THE VARIATION BEING NEGL IGIBLE, SHOULD BE IGNORED. PROPERTY NO.II: D.V.O. HAD VALUED THE PROPERTY AT RS.117.45 LAKHS, WHICH WAS REDUCED TO RS.98.89 LAKHS BY CIT (APPEALS) IN HIS ORDER DAT ED 14.2.03 IN ITA NO.60/2001-02 AGAINST THE ORIGINAL ASSESSMENT FOR T HE ASST.YEAR 1997- 98. 7.8 ACCORDING TO AR, THE APPELLANT HAD ACTUALLY INC URRED RS.61.71 LAKHS ONLY, AND ALL EXPENSES WERE SUPPORTED BY VOUC HERS, INVOICES AND BILLS WHICH HAVE BEEN SUBMITTED TO THE AO. 7.9 HE POINTED OURT THE FOLLOWING DISCREPANCIES IN THE VALUATION REPORT OF DVO: (A) MARBLES HAVE BEEN VALUED AT RS.36,84 LAKHS AS AGAIN ST THE ACTUAL OF RS.4.63 LAKHS INCURRED BY THE APPELLANT. I.T.A. NOS.306, 307, 308 & 309/MDS/2011 10 (B) INTERNAL WATER SUPPLY, SANITARY AND ELECTRICAL INST ALLATION HAS BEEN ASSUMED AT RS.15.03 LAKHS WITHOUT ANY BASI S. HE HAD PURELY DONE ON AN ESTIMATED PERCENTAGE ON CIVIL COST WITHOUT MAKING ANY DETAILED STUDY. (C) COST OF MARBLES, WHICH WAS ESTIMATED BY THE DVO AT RS.330 PER SQUARE FEET. WAS REDUCED TO RS.250 PER S Q.FT. BY CIT(A). THE STATE PWD HAS ESTIMATED AT RS.145 PER S Q.FT. ALL THE ABOVE ARE ONLY ESTIMATES AND THE VARIATION IS ON ACCOUNT OF THE INDIVIDUALS ESTIMATE. (D) DVO HAS ESTIMATED THE ARCHITECT FEES AT RS.2,42,426 /-, AS AGAINST THE ACTUAL OF RS.50,000/- ONLY. (E) DEDUCTION FOR SELF-SUPERVISION WAS ALLOWED AT 5% ON LY AND THIS SHOULD BE ALLOWED AT 15%. 7.10 ACCORDING TO AR IF THE ABOVE FACTORS ARE ADJUS TED ON A REALISTIC BASIS TO THE VALUATION OFFICERS REPORT, THE DIFFER ENCE IN THE VALUATION AND THE COST INCURRED BY THE APPELLANT WILL BE NEGLIGIB LE. HE THEREFORE, PRAYED THAT THE ADDITIONS TOTALLING TO RS.89,72,000/- (RS. 29,90,666/- FOR EACH OF THE ASST. YEARS 1995-96, 1996-97 AND 1997-98) MAY BE DELETED. 7.11 FURTHER HE RELIED ON THE FOLLOWING JUDGMENTS: SMT. AMIYA BALA PAUL VS. COMMISSIONER OF INCOME-TAX REPORTED IN 262 ITR 407 (SC) M.SELVARAJ VS. INCOME TAX OFFICER REPORTED IN 258 I TR (AT) 82 K.K.SESHAIYER VS. COMMISSIONER OF INCOME TAX REPORT ED IN 246 ITR 351 (MAD. H.C.) I.T.A. NOS.306, 307, 308 & 309/MDS/2011 11 COMMISSIONER OF INCOME-TAX VS. AUR PEE APARTMENTS P .LTD. REPORTED IN 319 ITR 276 (DEL. H.C.) COMMISSIONER OF INCOME-TAX VS. S.R. CONSTRUCTION RE PORTED IN 257 ITR 502 (MAD.H.C.) 8. ON THE OTHER HAND, THE DR RELIED UPON THE ORDER OF THE CIT(A) AND ALSO THE FOLLOWING CASE LAWS: DR.RAGHUVENDRA SINGH VS. COMMISSIONER OF INCOME TAX REPORTED IN [2014] 49 TAXMANN.COM 504 (PUNJAB & HARYANA) WHEREIN, IT WAS HELD THAT WHERE THE COST OF CONSTRU CTION SHOWN IN BOOKS OF ACCOUNT WAS NOT PROPER, REFERENCE BY ASSES SING OFFICER TO DVO WAS JUSTIFIED. BHARATHI CEMENT CORPORATION (P.) LTD. VS. COMMISSIO NER OF INCOME TAX REPORTED IN [2013] 33 TAXMANN.COM 643 ( ANDHRA PRADESH) WHEREIN, IT WAS HELD THAT THE ASSESSING OFFICER HAS POWER UNDER SECTION 142A TO TAKE UP ISSUE OF VALUATION OF INVES TMENT IN ASSESSEES PLANT FOR REASSESSMENT, IF NECESSARY. 9. WE HEARD BOTH THE PARTIES AND PERUSED THE MATERI AL AVAILABLE ON RECORD. IN THIS CASE, FOR THE ASSESSMENT YEAR 1997- 98, THE ASSESSEE CAME IN APPEAL BEFORE THIS TRIBUNAL IN ITA NO.1159/MDS/2 003. THE TRIBUNAL VIDE ORDER DATED 30.03.2004, INTERALIA HELD AS FOLLOWS: I.T.A. NOS.306, 307, 308 & 309/MDS/2011 12 THEREFORE, THE ASSESSING OFFICER CANNOT BASE HIS AS SESSMENT SOLELY ON THE BASIS OF THE REPORT OF THE DVO, BUT THIS CAN ONLY BE USED AS A P IECE OF SUPPORTIVE MATERIAL AND THE ASSESSING OFFICER SHOULD INDEPENDENTLY MAKE HIS OWN APPRAISAL OF THE COST OF CONSTRUCTION AND DETERMINE THE UNEXPLAINED INVESTMENT. IN VIEW O F THIS RULING, THE ACTION OF THE AUTHORITIES BELOW IS NOT JUSTIFIED. HENCE, WE REMIT THIS MATTER BACK TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION THAT HE SHALL MA KE INDEPENDENT ENQUIRY AND OWN APPRAISAL REGARDING THE COST OF CONSTRUCTION, CONSI DER THE DVO REPORT SUPPORTIVE DOCUMENT AND NOT AS PRIMARY MATERIAL TO DETERMINE THE COST O F CONSTRUCTION AND ARRIVE AT THE QUANTUM OF UNEXPLAINED INVESTMENT IN BUILDINGS. REG ARDING THE PERIOD OF CONSTRUCTION, ASCERTAIN FROM THE CURRENT ACCOUNT MAINTAINED BY TH E ASSESSEES FOR DRAWAL OF MONEY FOR THE PURPOSE OF CONSTRUCTION AND ALSO BILLS AND VOUC HERS PERTAINING TO CONSTRUCTION OF THESE BUILDINGS. 10. CONSEQUENTLY, THE ASSESSMENT WAS FRAMED BY THE ASSESSING OFFICER PLACING ONCE AGAIN ON THE SAME DVOS REPORT WHICH W AS OBTAINED BY AO BY EXERCISING THE POWER UNDER SECTION 142A OF THE INCO ME TAX ACT. IT WOULD BE APPROPRIATE TO REFER THE PROVISIONS OF SECTION 1 42A OF THE ACT, WHICH WAS INSERTED BY THE FINANCE (NO.2), 2004, WITH EFFE CT FROM NOVEMBER 15 , 1972, WITH EFFECT FROM NOVEMBER 15, 1972, WHICH READS TH US: '142A. ESTIMATE BY VALUATION OFFICER IN CERTAIN CAS ES.(1) FOR THE PURPOSES OF MAKING AN ASSESSMENT OR REASSESSMENT UNDER THIS ACT, WHERE AN ESTIMATE OF THE VALUE OF ANY INVESTMENT REFERRED TO IN SECTION 69 OR SECTION 69B OR THE VALUE OF ANY BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE REFERRED TO IN SECTION 69A O R 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 HIM. (2) THE VALUATION OFFICER TO WHOM A REFERENCE IS MA DE UNDER SUB-SECTION (1) SHALL, FOR THE PURPOSES OF DEALING WITH SUCH REFERENCE, HAVE ALL T HE POWERS THAT HE HAS UNDER SECTION 38A OF THE WEALTH-TAX ACT, 1957 (27 OF 1957). I.T.A. NOS.306, 307, 308 & 309/MDS/2011 13 (3) ON RECEIPT OF THE REPORT FROM THE VALUATION OFF ICER, THE ASSESSING OFFICER MAY, AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD, TAKE INTO ACCOUNT SUCH REPORT IN MAKING SUCH ASSESSMENT OR REASSESSMENT: PROVIDED THAT NOTHING CONTAINED IN THIS SECTION SHA LL APPLY IN RESPECT OF AN ASSESSMENT MADE ON OR BEFORE THE 30TH DAY OF SEPTEMBER, 2004, AND WHERE SUCH ASSESSMENT HAS BECOME FINAL AND CONCLUSIVE ON OR BEFORE THAT DATE, EXCEPT IN CASES WHERE A REASSESSMENT IS REQUIRED TO BE MADE IN ACCORDANCE WITH THE PROVI SIONS OF SECTION 153A.' 11. A PLAIN READING OF SUB-SECTION (1) MAKES IT CLE AR THAT FOR MAKING AN ASSESSMENT OR REASSESSMENT UNDER THE ACT, AN ESTIMA TE IS REQUIRED TO BE MADE IN RESPECT OF ANY INVESTMENT REFERRED TO IN SECTION 69 OR SECTION 69B OR THE VALUE OF ANY BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE, R EFERRED TO IN SECTION 69A OR SECTION 69B, IS REQUIRED TO BE MADE, THE ASSESSING OFFICER MAY REFER THE MATTER TO THE VALUATION OFFICER FOR ESTIMATING THE SAID VA LUE AND REPORTING THE MATTER TO HIM. SUB-SECTION (2) STIPULATES THAT THE VALUATION OFFICER TO WHOM THE REFERENCE IS MADE UNDER SUB-SECTION (1) SHALL, HAVE ALL THE P OWERS SIMILAR TO SECTION 38A OF THE WEALTH-TAX ACT, 1957, WHILE DEALING WITH SUCH R EFERENCE. ACCORDING TO SUB- SECTION (3), THE ASSESSING OFFICER ON RECEIPT OF RE PORT FROM THE VALUATION OFFICER MAY TAKE THE SAME INTO CONSIDERATION WHILE MAKING A SSESSMENT OR REASSESSMENT AFTER PROVIDING AN OPPORTUNITY OF BEING HEARD TO TH E ASSESSEE. HOWEVER, A PROVISO HAS BEEN ADDED, ACCORDING TO WHICH THIS SECTION SHA LL NOT APPLY IN RESPECT OF AN ASSESSMENT MADE ON OR BEFORE SEPTEMBER 30, 2004, WH ERE SUCH ASSESSMENT HAS BECOME FINAL AND CONCLUSIVE ON OR BEFORE THAT DATE EXCEPT IN CASES WHERE A I.T.A. NOS.306, 307, 308 & 309/MDS/2011 14 REASSESSMENT IS REQUIRED TO BE MADE IN ACCORDANCE W ITH THE PROVISIONS OF SECTION 153A. THE AMENDMENT IS INSERTED RETROSPECTIVELY FRO M NOVEMBER 15, 1972. 11.1 THE QUESTION REGARDING THE APPLICABILITY OF SE CTION 142A OF THE ACT WAS A SUBJECT-MATTER OF CONSIDERATION IN KRISHAN LAL DUA' S CASE [2005] 277 ITR 477 (P&H) WHEREIN THE ASSESSMENT HAD BECOME FINAL ON MA RCH 31, 1995, AND THE SAME WAS NOT LIABLE TO REASSESSMENT UNDER SECTION 1 53A OF THE ACT, IT WAS HELD THAT SECTION 142A OF THE ACT WOULD NOT BE APPLICABL E AS THE PROVISO WAS ATTRACTED. THE ALLAHABAD HIGH COURT IN SMT. SHASHI AGARWAL'S C ASE [2007] 210 CTR (ALL) 205 HAD HELD THAT WHERE THE TRIBUNAL HAD PASSED THE ORD ER BEFORE THE CUT-OFF DATE PRESCRIBED UNDER THE PROVISO TO SECTION 142A OF THE ACT AND THE APPEAL UNDER SECTION 260A OF THE ACT BEING MAINTAINABLE BEFORE T HE HIGH COURT ONLY ON SUBSTANTIAL QUESTION OF LAW, THEREFORE, IT COULD NO T BE SAID TO BE CONTINUATION OF THE ASSESSMENT PROCEEDINGS WITHIN THE MEANING OF TH E PROVISO TO SECTION 142A OF THE ACT. THE ASSESSING OFFICER, THUS, HAD NO POWER TO REFER THE MATTER TO THE DVO. 12. IN THE PRESENT CASE, ORIGINALLY THE ASSESSMENT WAS FRAMED FOR THE ASSESSMENT YEAR 1997-98 UNDER SECTION 143 (3) VIDE ASSESSMENT ORDER DATED 30.03.2000 BY DCIT, CENTRAL CIRCLE II(2), CHE NNAI AND LATER ON CIT(A) PASSED THE APPELLATE ORDER ON 04.02.2003. CO NSEQUENT TO THE I.T.A. NOS.306, 307, 308 & 309/MDS/2011 15 APPEAL AGAINST THIS ORDER, TRIBUNAL PASSED THE ORDE R IN ITA NO. 1159/2003 ON 30.03.2004 FOR THE ASSESSMENT YEAR 1997-98 AND AS READ FROM THE ORDER OF THE TRIBUNAL, IT HAS GIVEN A SPECIFIC FIND ING THAT THE ASSESSING OFFICER SHALL MAKE AN INDEPENDENT ENQUIRY AND OWN A PPRAISAL REGARDING THE COST OF CONSTRUCTION AND CONSIDER THE DVO REPORT A S SUPPORTIVE DOCUMENT AND NOT AS PRIMARY MATERIAL TO DETERMINE THE COST O F CONSTRUCTION AND ARRIVE AT THE QUANTUM OF UNEXPLAINED INVESTMENT IN BUILDINGS. CONTRARY TO THIS, THE AO ONCE AGAIN MADE AN ASSESSMENT BASED ON LY ON VERY SAME DVOS REPORT WHICH CANNOT BE UPHELD. AS LAW STOOD A S ON THIS ASSESSMENT YEARS UNDER CONSIDERATION, SECTION 142A OF THE ACT CANNOT BE APPLIED AND NO RELIANCE CAN BE PLACED ON THAT PROVISIONS FOR TH ESE ASSESSMENT YEARS. CONSEQUENTLY, THE ASSESSMENTS FRAMED ON THE SAID DV OS REPORT CANNOT BE UPHELD. IN VIEW OF THIS, WE ARE INCLINED TO ANNUL T HESE ASSESSMENTS FOR ALL THESE THREE ASSESSMENT YEARS WHICH IS WHOLLY BASED ON DVOS REPORT WHICH WAS OBTAINED UNDER SECTION 142A OF THE INCOME TAX A CT. ACCORDINGLY, ALL THE THREE APPEALS FOR ASSESSMENT YEARS 1995-96, 199 6-97 & 1997-98 ARE ALLOWED. SINCE WE HAVE QUASHED THE ASSESSMENTS ITSE LF, WE ARE NOT GOING INTO THE OTHER ARGUMENTS AND GROUNDS RAISED BY THE ASSESSEE AS WELL AS BY DEPARTMENT IN THESE APPEALS. 13. IN THE RESULT, ALL THE THREE APPEALS IN ITA NOS . 306, 307 & I.T.A. NOS.306, 307, 308 & 309/MDS/2011 16 308/MDS/2011 FOR ASSESSMENT YEARS 1995-96, 1996-97 & 1997-98 ARE ALLOWED. ITA NO. 309/MDS/2011 14. THE ONLY GROUND OF APPEAL IS LEVY OF PENALTY UN DER SECTION 271(1)(B) OF THE ACT. THE FACTS OF THE CASE ARE THA T DURING THE SCRUTINY PROCEEDINGS FOR THE ASSESSMENT YEAR 2003-04, NOTICE UNDER SECTION 142(1) OF THE INCOME TAX ACT, 1961 WAS ISSUED TO THE APPEL LANT CALLING FOR DETAILS OF NAMES AND ADDRESSES OF ALL PARTNERS, BANK ACCOUN TS ALONG WITH STATEMENTS, NOTE ON BUSINESS ACTIVITIES CARRIED ON DURING THE YEAR, IMMOVABLE PROPERTIES ALONG WITH RENT RECOVERABLE, L OANS AND ADVANCES MADE ALONG WITH INTEREST RECEIVABLE AND CERTIFIED C OPY OF PROFIT AND LOSS ACCOUNT AND BALANCE SHEET. A COPY OF THE NOTICE WAS SENT TO THE APPELLANTS REPRESENTATIVE ALSO. THERE WAS NO COMPLIANCE TO THE STATUTORY NOTICE ISSUED AND THE APPELLANT DID NOT FILE THE DETAILS C ALLED FOR. AS THERE WAS FAILURE TO COMPLY WITH THE NOTICE UNDER SECTION 142 (1) PENALTY PROCEEDINGS UNDER SECTION 271(1)(B) OF THE INCOME TAX ACT, 1961 WERE INITIATED IN THE ASSESSMENT ORDER. 15. ON APPEAL, CIT(A) OBSERVED THAT THE ASSESSING O FFICER ISSUED NOTICE I.T.A. NOS.306, 307, 308 & 309/MDS/2011 17 UNDER SECTION 142(1) OF THE ACT. THE ASSESSEE HAS N OT SHOWN EITHER DURING THE PENALTY PROCEEDINGS OR THE APPELLATE PROCEEDING S THAT IT FURNISHED ALL THE PARTICULARS CALLED FOR. COMPLETION OF THE ASSES SMENT ACCEPTING THE RETURNED INCOME CANNOT ABSOLVE THE APPELLANT FROM N ON COMPLIANCE OF NOTICE ISSUED UNDER SECTION 142(1). ACCORDINGLY, HE CONFIRMED THE LEVY OF PENALTY UNDER SECTION 271(1)(B). AGAINST THE ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 16. THE LEARNED AR SUBMITTED THAT THE APPELLANT HAD FILED A RETURN DECLARING AN INCOME OF RS.16,800/- WHICH WAS ACCEPT ED UNDER SECTION 143(1) AND, LATER, U/S 143(3). COPIES OF THE RETURN OF INCOME AND ORDERS U/S. 143(1)(A) AND 143(3) ARE ENCLOSED. 17. THE FOLLOWING IS THE EXTRACT OF THE ASSESSMENT ORDER DATED 28.03.2006 UNDER SECTION 143(3). THE ASSESSEE DID NOT FILE RETURN OF INCOME VOLUNTA RILY UNDER SECTION 139(1) OF THE I.T.ACT. HENCE, NOTICE U/S 142(1) WAS ISSUED CALLIN G FOR RETURN OF INCOME ON 23.01.2004. THE ASSESSEE FILED RETURN OF INCOME ON 09.02.2004 DECLARING NIL INCOME. THE RETURN WAS PROCESSED U/S. 143(1)ON 23.02.2004. NOTICE U/S 143(2) WAS ISSUED ON 14.06.2004, 7.12.2005 AND 20.12.2005. NOTICES U/S 1 42(1) & 143(2) WERE ISSUED ON 3.1.2006 CALLING FOR CERTAIN INFORMATION AND EXPLAN ATIONS. 18. THEREFORE, ACCORDING TO HIM THE A.O. WAS FACTUA LLY WRONG IN STATING I.T.A. NOS.306, 307, 308 & 309/MDS/2011 18 THAT THE APPELLANT FILED NIL RETURNS. SHOW CAUSE NOTICE DATED 28.03.2006 FOR LEVY OF PENALTY ISSUED BY THE A.O., CONTAINS (I ) NON-COMPLIANCE WITH NOTICE UNDER SECTION 142(1) DATED 23.01.2004 (II) N OTICE UNDER SECTION 143(2) DATED 20.12.2005 AND (III) CONCEALMENT OF IN COME. NONE OF THEM WAS SCORED OUT. AS THE SHOW CAUSE NOTICE REFERS TO SEVERAL DEFAULTS, IT WAS PROBABLY ISSUED IN A CASUAL MANNER. AS THE APPELLAN T WAS NOT AWARE OF THE ALLEGED DEFAULT COMMITTED BY THEM, IT HAD REQUESTED IN ITS LETTERS DATED 25.08.2006 AND 22.09.2006 EXACT DETAILS OF DEFAULT. NO REPLY WAS RECEIVED. IT WOULD BE SEEN FROM THE ASSESSMENT ORDER THAT NOT ICE UNDER SECTION 142(1) WAS ISSUED ON 23.1.2004 FOR HEARING. THE CAS E WAS HEARD ON 14.06.2004, 07.12.2005 AND 03.01.2006. HOWEVER, THE PENALTY ORDER UNDER SECTION 271(1) (B) REFERS TO AN ALLEGED NOTIC E OF HEARING ON 16.01.2006, WHICH TO BE BEST OF APPELLANTS KNOWLED GE, WAS NOT RECEIVED. THE SAID DATE OF 16.01.2006 DOES NOT FIND ANY REFER ENCE EITHER IN THE SHOW-CAUSE NOTICE OR ASSESSMENT ORDER. THEREFORE, T HE ORDER OF PENALTY HAS TO BE QUASHED, ON THE GROUND OF AN ALLEGED DEFA ULT ON 16.01.2006 FOR WHICH NO SHOW CAUSE NOTICE WAS ISSUED. IN ANY CASE, THE INCOME RETURNED, VIZ. RS.16,800/- HAS BEEN ACCEPTED AS PER ORDER DATED 28.03.2006 AND, THEREFORE, THE APPELLANT SUBMITS TH AT THERE WAS NO DEFAULT ON ITS PART. EVEN OTHERWISE, NO CONTUMACIOUS CONDUC T OR WILFUL NEGLECT OF LAW HAS BEEN ALLEGED. THE APPELLANT, THEREFORE, PRA YS FROM THE PENALTY I.T.A. NOS.306, 307, 308 & 309/MDS/2011 19 LEVIED MAY BE CANCELLED. 19. THE DR RELIED UPON THE ORDER OF THE CIT (A). 20. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. ORIGINALLY THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2003- 2004 WAS PROCESSED U/S 143(1)(A) OF THE ACT VIDE IN TIMATION DATED 23-02- 2004 BY ACCEPTING THE RETURNED INCOME OF RS.16,800 /-. IT IS SEEN FROM THE ASSESSMENT ORDER DATED 28-03-2006 FOR THE ASSES SMENT YEAR 2003- 2004 THAT THE FIRST NOTICE UNDER SECTION 143(2) W AS ISSUED TO ASSESSEE ON 14-06-2004 AND ONCE AGAIN ON 7-12-2005 AND ON20- 12-2005. NOTICE U/S 142(1) AND 143(2) WERE ISSUED ON 3-1-2006 CALLING C ERTAIN INFORMATION AND EXPLANATIONS FOR THE PURPOSE OF ASSESSMENT. ON VARI OUS OCCASION THE COUNSEL FOR ASSESSEE APPEARED AND ON THE BASIS OF R ELEVANT MATERIALS AVAILABLE ON RECORD AND INCOME WAS DETERMINED AT RS .16,800/-. THUS, IT MEANS THAT THE ASSESSING OFFICER HAS ACCEPTED THE R ETUNED INCOME AND THERE IS NO DIFFERENCE BETWEEN THE INCOME DETERMINE D IN INTIMATION ISSUED U/S 143(1)(A) OF THE ACT AND ASSESSMENT ORDER PASSE D U/S 143(3) OF THE ACT. THERE IS NO LOSS OF REVENUE TO THE GOVERNMENT. THE ASSESSMENT ORDER FOR THE YEAR UNDER CONSIDERATION WAS PASSED WITH TH E PARTICIAPTION OF THE ASSESSEES COUNSEL. FURTHER, THE PENALTY WAS LEVIED FOR NON- REPLY OF NOTICE I.T.A. NOS.306, 307, 308 & 309/MDS/2011 20 DATED 03-01-2006 POSTING THE CASE FOR HEARING ON 16 -01-20016. HOWEVER, THERE IS NO REFERENCE OF ASSESSEES FAILURE TO COMP LY WITH THIS NOTICE IN THE ASSESSMENT ORDER. THUS, IT LEADS TO CONCLUSION THAT THE ASSESSING OFFICER WAS ABLE TO COMPLETE THE ASSESSMENT U/S 143(3) THOU GH ASSESSEE HAS NOT COMPLIED THIS NOTICE AND NO PREJUDICE CAUSED TO A.O . IN OUR OPINION, IT IS NOT APPROPRIATE TO LEVY PENALTY MECHNICALLY FOR SUC H TECHNICAL BREACH OF PROVISIONS OF THE ACT. ACCORDINGLY, WE ARE OF THE O PINION THAT THIS IS NOT A FIT CASE TO LEVY PENALTY U/S 271(1)(B) OF THE ACT AND W E DELETE THE PENALTY LEVIED UNDER SECTION 271(1)(B) OF THE ACT BY ASSESS ING OFFICER AND CONFIRMED BY THE CIT(A)/. 21. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO.309/MDS/2011 FOR ASSESSMENT YEAR 2003-04 IS ALLOWED. ORDER PRONOUNCED ON 16 TH NOVEMBER, 2016 AT CHENNAI. SD/- SD/- ( ! ' . # $% ) ( &' ( ) ) (DUVVURU RL REDDY) (CHANDRA POOJAR I) * +, /JUDICIAL MEMBER +, /ACCOUNTANT MEMBER &* /CHENNAI, -+ /DATED, THE 16 TH NOVEMBER, 2016. SP. I.T.A. NOS.306, 307, 308 & 309/MDS/2011 21 +. /0 10 /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. 2 ( )/CIT(A) 4. 2 /CIT, 5. 034 5 /DR 6. 4% 6 /GF.