M/s. Chohan Resorts, Ferozepur V. The Assessing Officer, Ferozepur

ITA 339/ASR/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5744 (ITAT-AMRITSAR)
• Duration Of Justice: 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 29-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ANUPAM GUPTA ADVS; SUBASH KHANNA
• Keywords: Capital asset; Application of stay; Question of law; Valuation report
• Section: 69C; 143(3); 142(1); 32; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH: AMRITSAR. BEFORE SHRI H.L. KARWA, VICE PRESIDENT AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER. S.A. NO.02(ASR)/2011. (ARISING OUT OF ITA NO.339(ASR)/2010) (ASSESSMENT YEAR:2007-08) AND I.T.A. NO.339(ASR)/2010. (ASSESSMENT YEAR: 2007-08) M/S.CHOHAN RESORTS, THE ASSESSING OFFICER, TALWANDI BHAI, WARD 3(1), DISTT. FEROZEPUR. FEROZEPUR. (APPELLANT) VS. (RESPONDENT) APPELLANT BY: S/SHRI SUBASH KHANNA & ANUPAM GUPTA , ADVS. RESPONDENT BY: SHRI TARSEM LAL, D.R. ORDER PER H.L. KARWA, VICE PRESIDENT. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE CIT(A), BHATINDA DATED 2-7-2010, RELATING TO THE A SSESSMENT YEAR 2007-08. 2. IN THIS APPEAL, THE ASSESSEE HAS TAKEN THE FOLLO WING GROUNDS:- 1. ON FACTS AND IN CIRCUMSTANCES OF THE CASE, THE ASSESSING OFFICER HAS GROSSLY ERRED IN APPLYING SECTION 69B OF THE IN COME TAX ACT WHICH DEALS WITH BULLION AND JEWELLERY. THE CORREC T PROVISION OF EXPENSES AS COST OF CONSTRUCTION ARE CONTAINED I N SECTION 69C WHICH HAS NOT BEEN COVERED UNDER THE AMENDED PR OVISION OF SEC. 142A(1). AS SUCH THE AO HAS NO POWER TO GE T 2 CONSTRUCTION EXPENSES VALUED BY DVO. THE AO HAS ACT ED ILLEGALLY ON THIS ISSUE. 2. ON FACTS AND IN CIRCUMSTANCES OF THE CASE, THE A O HAS NOT APPLIED HIS MIND AS TO WHETHER DVO VALUATION WAS EV EN REQUIRED OR NOT. 3. ON FACTS AND IN CIRCUMSTANCES OF THE CASE, WHEN THE AO HAS NOT REJECTED THE BOOKS OF ACCOUNT AS REQUIRED U/S.145(1 ) AND ON THE CONTRARY THE AO HAS SPECIFICALLY ACCEPTED THE BOOKS OF ACCOUNT OF THE APPELLANT, THEN NO ADDITION COULD BE NAME TO THE INCOME OF THE APPELLANT. 4. ON FACTS AND IN CIRCUMSTANCES OF THE CASE, THE AO SHOULD HAVE ACCEPTED THE COST OF CONSTRUCTION SHOWN AND CORROBO RATED BY TWO APPROVED VALUERS OF THE ASSESSEE. THE AOS ACT ION TO GET A SEMI FINISHED COST OF CONSTRUCTION EXPENSES BY THE DVO IS CLEARLY ILLEGAL. 5. ALL THE DIRECT AUTHORITIES CITED BY THE APPELLAN T BEFORE THE AO AND ALSO THE CIT(A) HAVE BEEN BRUSHED ASIDE AND THE ACTION OF LD. CIT(A) UPHOLDING THE ADDITION OF RS.5510924/- I S ILLEGAL AND BAD IN LAW. THE SAME MAY BE KINDLY DELETED. 3. VIDE LETTER DATED 13-6-2011, THE ASSESSEE HAS AL SO RAISED THE ADDITIONAL GROUND OF APPEAL, WHICH READS AS UNDER:- ON FACTS AND IN CIRCUMSTANCES OF THE CASE, RELYING ON SARGAM CINEMA VS. CIT (SUPRA), WHEN THE AO HAS NOT REJECTE D THE BOOK OF ACCOUNT AS REQUIRED U/S.145(3) AND ON THE CONTRARY THE AO HAS SPECIFICALLY ACCEPTED THE BOOKS OF ACCOUNT OF THE A PPELLANT, NO ADDITION COULD BE MADE TO THE INCOME OF THE APPELLA NT ON THE BASIS OF DVO VALUATION. 4. AS REGARDS THE ADMISSION OF ADDITIONAL GROUND, W E FIND THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY TH E JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. VS. C.I.T. 3 (1998) 229 ITR 383 (SC), WHEREIN THE HONBLE SUPREM E COURT HELD (HEAD NOTE) AS UNDER:- UNDOUBTEDLY, THE TRIBUNAL HAS THE DISCRETION TO AL LOW OR NOT TO ALLOW A NEW GROUND TO BE RAISED. BUT WHERE THE TRIBUNAL IS ONLY REQUIRED TO CONSIDER THE QUESTION OF LAW ARISING FROM FACTS WHI CH ARE ON RECORD IN THE ASSESSMENT PROCEEDINGS, THERE IS NO REASON WHY SUCH A QUESTION SHOULD NOT BE ALLOWED TO BE RAISED WHEN IT IS NECES SARY TO CONSIDER THAT QUESTION IN ORDER TO CORRECTLY ASSESS THE TAX LIABILITY OF AN ASSESSEE. 4.1 IN OUR VIEW, THE ADDITIONAL GROUND RAISED BY TH E ASSESSEE IS A QUESTION OF LAW ARISING FROM THE FACTS, WHICH ARE ON RECORD IN THE ASSESSMENT PROCEEDINGS, AND, THEREFORE, RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF NATIONAL THER MAL POWER CO. LTD. (SUPRA), WE ADMIT THE ADDITIONAL GROUND OF APPEAL. 5. FIRST, WE DECIDE THE ADDITIONAL GROUND OF APPEAL , WHICH GOES TO THE ROOT OF THE MATTER. THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2007-08 DECLARIN G INCOME OF RS.2,010/- ON 6-8-2007. THIS RETURN WAS PROCESSED UNDER SECTI ON 143(1) OF THE INCOME TAX ACT, 1961 (IN SHORT, THE ACT) ON 27-6-2008. THE CASE WAS SELECTED FOR SCRUTINY BY ISSUING NOTICE UNDER SECTION 143(2) OF THE ACT. SUBSEQUENTLY, FRESH NOTICE UNDER SECTION 142(1) ALONGWITH DETAILE D QUESTIONNAIRE WERE ISSUED ON 7-10-2009. THE A.O. HAS OBSERVED THAT RE QUISITE INFORMATION HAS BEEN FILED AND PLACED ON RECORD. BOOKS OF ACCOUNT WERE PRODUCED, WHICH WERE EXAMINED BY TEST CHECK. IN THE BALANCE SHEET FILED ALONG WITH THE RETURN, THE ASSESSEE HAS SHOWN INVESTMENT OF RS.5,7 3,000/- IN LAND ACCOUNT AND RS.4743576/- IN THE BUILDING ACCOUNT. THE THEN AO VIDE NOTICE UNDER SECTION 142(1) DATED 5-9-2008 REQUIRED THE ASSESSEE TO FURNISH SOURCE OF INVESTMENT MADE BY THE PARTNERS. IN RESPONSE TO TH IS NOTICE, THE ASSESSEE DID 4 NOT FURNISH THE REQUISITE INFORMATION. SO THE THEN A.O. DIRECTED THE INCOME TAX INSPECTOR TO MAKE LOCAL ENQUIRIES TO ASCERTAIN THE VALUE OF THE LAND AND COST OF CONSTRUCTION OF BUILDING OF CHOHAN RESORTS. THE INSPECTOR VIDE HIS REPORT DATED 13-5-2009 ESTIMATED THE COST OF CONSTR UCTION AT ABOUT RS. ONE CRORE. SINCE THE DIFFERENCE BETWEEN THE COST OF BU ILDING DECLARED BY THE ASSESSEE AND AS ESTIMATED BY THE INSPECTOR WAS VER Y LARGE, THE THEN ASSESSING OFFICER THOUGHT IT FIT TO CONSULT THE TEC HNICAL OFFICER OF THE DEPARTMENT I.E. THE VALUATION OFFICER TO DETERMINE THE EXACT COST OF CONSTRUCTION AND HENCE BY VIRTUE OF POWER CONFERRED UPON AS PER PROVISIONS OF SECTION 142A OF THE ACT, THE THEN AO MADE A REFE RENCE TO THE VALUATION OFFICER OF THE INCOME TAX DEPARTMENT, AMRITSAR, TO ESTIMATE THE COST OF INVESTMENT OF THE PROPERTY OF CHOHAN RESORTS MADE B Y THE ASSESSEE DURING THE FINANCIAL YEAR 2006-07 VIDE HIS OFFICE LETTER N O.306 DATED 14-5-2009. THE VALUATION OFFICER VIDE HIS LETTER DATED 25-5-20 09 ON RECEIPT OF THE REFERENCE MADE BY THE A.O. REQUESTED THE ASSESSEE T O PRODUCE CERTAIN DOCUMENTS/INFORMATION, WHICH ARE MENTIONED IN PARA 3 OF THE ASSESSMENT ORDER. THE VALUATION OFFICER AFTER PHYSICALLY INSPE CTING THE PROPERTY AND RECORDING THE SPECIFICATIONS AND MEASUREMENT OF THE PROPERTY IN THE PRESENCE OF SHRI PARMINDER SINGH, ONE OF THE PARTNER OF THE FIRM, FINALIZED THE VALUATION REPORT AND ASSESSED THE COST OF THE PROPE RTY AT RS.10254500/- AFTER TAKING INTO ACCOUNT THE DOCUMENTS SUBMITTED BY THE ASSESSEE. THE D,V.O. FURNISHED THE REPORT TO THE ASSESSEE ON 7-10-2009 F OR FURNISHING HIS COMMENTS/OBJECTIONS. THE ASSESSEE VIDE ITS LETTERS DATED 30-11-2009 AND 2-12-2009 FURNISHED THE COPY OF ITS BUILDING ACCOU NT AS PER ITS BOOKS OF ACCOUNT ALONG WITH COPIES OF BILLS OF ITEMS USED IN BUILDING AND VOUCHERS ON ACCOUNT OF LABOUR PAID. THE ASSESSEE ALSO OFFERED ITS COMMENTS ON THE VALUATION REPORT PREPARED BY THE GOVERNMENT VALUER. THE A.O. HAS 5 REPRODUCED THE REPLY OF THE ASSESSEE IN PARA 4 OF T HE ASSESSMENT ORDER. VIDE ANOTHER LETTER DATED 24/30-11-2009, THE ASSESSEE ST ATED AS UNDER:- I) FOR THE ASSESSMENT YEAR 2007-08 YOUR GOODSELF H AS REFERRED TO DVO THE ABOVE CASE FOR VALUATION OF PROPERTY OF THE ASSESSEE. II) WITHOUT GOING INTO OTHER ASPECTS OF CASE SUCH AS DI FFERENCE OF VALUATION IN PROPERTY AS COMPARED TO THE SHOWN VALU E IN BOOKS OF ASSESSEE, A BASIC OBJECTION IS RAISED AGAINST TH E ACTION OF THE INCOME TAX DEPARTMENT CANNOT SEND FOR VALUATION OF ANY PROPERTY TO DVO UNLESS IT IS POINTED OUT THAT THE C ONSTRUCTION COST AS SHOWN BY THE ASSESSEE IN HIS ACCOUNT BOOKS IS DEFECTIVE AND SECTION 145 IS APPLIED. THE BASIC REASON FOR TH IS IS THAT HOW THE AO CAME TO KNOW OF THE DIFFERENCE IN VALUATION OF PROPERTY AND SENT THE CASE TO DVO VALUATION UNLESS BOOKS OF ACCOUNT WERE EXAMINED AND DEFECTS FOR INVOKING SECTION 145 WERE POINTED TO THE ASSESSEE. IN SUCH CIRCUMSTANCES THE BASIC REQUIREMENT AS TO ON WHAT BASIS THE AO HAS SENT FOR DVO VALUATION IS WRONG. III) MY ABOVE CONTENTION FINDS SUPPORT OF TWO FOLLOWING RULINGS OF HONBLE P & H HIGH COURT WHEREIN IT HAS BEEN CLEARL Y RULED THAT WITHOUT INVOKING SECTION 145 THE DVO VALUATION IS CLEARLY WRONG. KINDLY REFER TO THE FOLLOWING JUDGMENTS. CIT VS. SWASTIK UDYOG PVT. LTD. (2006) 194 TAXATION 707 P& H HIGH COURT. CIT VS. HARCHAND PALACE (2005) 184 TAXATION 180 P& H HIGH COURT IV) BOTH THE CONTENTION ARE IDENTICAL TO THE FACTS OF C ASE AS BEFORE YOUR GOODSELF. IT IS THEREFORE REQUESTED TO RESPEC TFULLY FOLLOWING THE CASE OF JURISDICTIONAL HIGH COURT THE DVO VALUATION BE DISCARDED OUTRIGHTLY. 6 5.1 THE ASSESSEE VIDE LETTER DATED 2-12-2009 SUBMIT TED SOME BILLS OF ITEMS USED IN THE CONSTRUCTION AND STATED THAT AMOUNT OF RS.764474/- WAS SPENT ON CONSTRUCTION DURING THE PERIOD 1-4-2008 TO 31-3-200 9. THE ASSESSEE ALSO SUBMITTED COPIES OF VALUATION REPORT PREPARED BY TW O DIFFERENCE VALUERS. THE A.O. AFTER TAKING INTO CONSIDERATION THE REPLY OF THE ASSESSEE AND DOCUMENTS FURNISHED BY IT, THE COST OF CONSTRUCTION IN RESPECT OF CHOHAN RESORTS WAS TAKEN AT RS.10254500/- AS ASSESSED BY T HE VALUATION OFFICER OF THE DEPARTMENT FOR THE REASONS STATED IN PARA 8 OF THE ASSESSMENT ORDER. THE A.O. IN PARA 10 OF THE ASSESSMENT ORDER OBSERVED AS UNDER:- 10. TO CONCLUDE, SINCE THE ASSESSEE DURING THE YE AR HAD MADE INVESTMENT ON CAPITAL BUSINESS ASSETS IN WHICH DEPR ECIATION IS ALLOWABLE AS PER SECTION 32 OF INCOME TAX ACT, 1961 AND THE ASSESSEE HAD CREATED A BUSINESS CAPITAL ASSETS WITH LONG TER M BENEFITS, THE INVESTMENT OF RS.5510924/- BEING THE DIFFERENCE ASS ESSED BY THE GOVERNMENT VALUER IN RESPECT OF M/S.CHOHAN RESORTS AND THE COST DECLARED BY THE ASSESSEE IS ADDED U/S.69B OF THE IN COME TAX ACT, 1961. PENALTY PROCEEDINGS U/S.271(1)(C) OF THE INCO ME TAX ACT, 1961 ARE INITIATED FOR FURNISHING IN ACCURATE PARTICULAR S OF INCOME. 5.2 THE A.O. MADE THE ADDITION OF RS.55,10,924/- BE ING THE DIFFERENCE ASSESSED BY THE GOVERNMENT VALUER TO THE COST DECLA RED BY THE ASSESSEE. THIS ADDITION HAS BEEN MADE UNDER SECTION 69B OF TH E ACT. 6. ON APPEAL, THE CIT(A) DISMISSED THE APPEAL OF TH E ASSESSEE VIDE HIS ORDER DATED 2-7-2010 AND HENCE THE ASSESSEE IS IN F URTHER APPEAL BEFORE THE TRIBUNAL. 7. SHRI SUBHASH KHANNA, ADVOCATE, THE LEARNED COUNS EL FOR THE ASSESSEE, SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROC EEDINGS UNDER SECTION 143(3) OF THE ACT, THE ASSESSEE HAS DULY PRODUCED B OOKS OF ACCOUNT MAINTAINED DURING THE REGULAR COURSE OF BUSINESS, S UCH AS CASH BOOK, LEDGER, BANK ACCOUNTS AND OTHER STATEMENTS AS ORDER ED BY THE A.O. SHRI 7 SUBHASH KHANNA, ADVOCATE, THE LEARNED COUNSEL FOR T HE ASSESSEE, FURTHER SUBMITTED THAT THE ASSESSEE HAS ALSO SUBMITTED EVID ENCE OF COST OF CONSTRUCTION OF BUILDING, SUCH AS BILLS OF STEEL, C EMENT, SAND, BRICKS, BAJRI, WOOD, ALUMINIUM SHEETS, VOUCHERS ON ACCOUNT OF LABO UR PAID. THESE FACTS HAVE BEEN DULY ACCEPTED BY THE AO ON PAGE 4 PARA 4 OF HIS ORDER. SHRI SUBHASH KHANNA, THE LEARNED COUNSEL FOR THE ASSESSE E, ALSO SUBMITTED THAT THE A.O. HAS NOT FOUND ANY DEFECT OR DEFICIENCY IN THE INVESTMENT SHOWN, WHICH IS FULLY RECORDED IN THE REGULAR BOOKS OF ACC OUNT MAINTAINED BY THE ASSESSEE. HE FURTHER SUBMITTED THAT THE ASSESSEE H AS RECORDED ITEMWISE DETAILS OF THE EXPENDITURE MADE IN THE CONSTRUCTION OF THE AFORESAID CHOHAN RESORTS BUILDING, CASH BOOK/LEDGER AND ALL THE ENTR IES MADE THEREIN ARE FULLY SUPPORTED BY THE BILLS, COPIES OF WHICH WERE FURNIS HED BORE THE A.O. 7.1 SHRI SUBHASH KHANNA, THE LEARNED COUNSEL FOR TH E ASSESSEE, VEHEMENTLY ARGUED THAT THE A.O. HAS NOT POINTED OUT A SINGLE INSTANCE TO SHOW THAT THE ASSESSEE HAD ACTUALLY INCURRED EXPEND ITURE MORE THANRECORDED IN THE BOOKS OF ACCOUNT. ACCORDINGLY, SHRI SUBHASH KHANNA, THE LEARNED COUNSEL FOR THE ASSESSEE, SUBMITTED THAT THE REPORT OF THE DVO RELIED UPON BY THE AO IS NOT CORRECT AND RELIABLE AND THE EXPENDIT URE SHOWN IN THE CONSTRUCTION AS PER BOOKS OF ACCOUNT IS LIABLE TO B E ACCEPTED. 7.2 SHRI SUBHASH KHANNA, THE LEARNED COUNSEL FOR TH E ASSESSEE, WHILE RELYING UPON THE JUDGMENT OF THE HONBLE SUPREME C OURT IN THE CASE OF SARGAM CINEMA VS. CIT (2011) 241 CTR (SC) 179 SUBMI TTED THAT REFERENCE TO THE DVO BY THE A.O. WAS NOT VALID WITHOUT THE BO OKS OF ACCOUNT BEING REJECTED. IN OTHER WORDS, SHRI SUBHASH KHANNA, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE A.O. COULD NOT HAVE RE FERRED THE MATTER TO THE DVO WITHOUT THE BOOKS OF ACCOUNT BEING REJECTED, AN D, THEREFORE, RELIANCE 8 PLACED ON THE REPORT OF THE DVO WAS MISCONCEIVED, A ND THEREFORE, THE ORDER OF THE CIT(A) MAY BE QUASHED. 8. SHRI TARSEM LAL, THE LEARNED D.R. SUBMITTED THAT UNDER SECTION 142A OF THE ACT, FULL POWERS HAVE BEEN GIVEN TO THE A.O. TO CALL FOR THE REPORT FROM THE VALUATION OFFICER. HE, THEREFORE, SUBMITT ED THAT THE A.O. HAS CORRECTLY RELIED UPON THE REPORT OF THE DVO IN MAKI NG THE IMPUGNED ADDITION. SHRI TARSEM LAL, THE D.R. ALSO SUBMITTED THAT THERE WAS NO REQUIREMENT UNDER LAW TO REJECT THE BOOKS OF ACCOU NT BECAUSE THE A.O, HAS FULL POWER TO CALL FOR A REPORT FROM THE V,O. HE A CCORDINGLY SUBMITTED THAT THE ADDITIONAL GROUND RAISED BY THE ASSESSEE MAY BE REJECTED AND THE APPEAL MAY DECIDED ON MERITS. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO PER USED THE MATERIAL AVAILABLE ON RECORD. IN OUR CONSIDERED VIEW, IF TH E ASSESSEE MAINTAINS BOOKS OF ACCOUNT IN THE REGULAR COURSE OF BUSINESS AND NE CESSARY ENTRIES RELATING TO THE EXPENDITURE FOR THE COST OF CONSTRUCTION ARE RE CORDED IN THE BOOKS OF ACCOUNT, WHICH ARE OPEN TO VERIFICATION AND ITS COR RECTNESS IS NOT DOUBTED, IT SHOULD BE ACCEPTED. IN THE INSTANT CASE, THE A.O. CATEGORICALLY STATED IN PARA 1 OF THE ASSESSMENT ORDER THAT THE REQUISITE INFORM ATION HAS BEEN FILED AND PLACED ON RECORD. BOOKS OF ACCOUNT WERE PRODUCED W HICH WERE EXAMINED BY TEST CHECK. THE A.O. HAS ADMITTED IN PARA 2 OF THE ASSESSMENT ORDER THAT THE ASSESSEE HAS SHOWN INVESTMENT OF RS.5,73,000/- IN L AND ACCOUNT AND RS.47,43,576/- IN THE BUILDING ACCOUNT. THE COST O F CONSTRUCTION OF BUILDING OF CHOHAN RESORTS HAS BEEN DULY SHOWN IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. IN PARA 4 OF THE ASSESSMENT ORDER, THE A. O. HAS CATEGORICALLY STATED THAT THE ASSESSEE VIDE ITS LETTERS DATED 30-11-2009 AND 2-12-2009 FURNISHED THE COPY OF ITS BUILDING ACCOUNT AS PER ITS BOOKS O F ACCOUNT ALONGWITH COPIES OF BILLS OF ITEMS USED IN BUILDING AND VOUCHERS ON ACCOUNT OF LABOUR PAID. IT 9 IS ALSO CLEAR FROM THE ABOVE REPLY OF THE ASSESSEE THAT IT WAS STATED BEFORE THE A.O. THAT THE ACTION OF THE DEPARTMENT IS WRONG TO SEND FOR DVO WHEN EVEN BOOKS OF ACCOUNT WERE NOT SEEN AND WHAT TO SAY ABOU T REJECTION. THIS CONTENTION OF THE ASSESSEE IS STATED IN PARA 4 OF T HE ASSESSMENT ORDER. IN SAME REPLY, THE ASSESSEE CONTENDED THAT IT HAS SHOWN THE FOLLOWING IN THE BOOKS OF ACCOUNT:- UPTO 31-3-2007 47,43,576/- IN BOOKS OF 31-3-2009 7,64,474/- TOTAL 55,08,050/- 15% VARIATION FOR WHICH NO ACTION IF REQUIRED BECAUSE EVERY BODY HAS HIS OWN WAY TO VALUATION. 8,26,207/- TOTAL 63,31,257/- 9.1 IT IS ALSO NOT THE CASE OF THE REVENUE THAT BO OKS OF ACCOUNT HAVE NOT BEEN MAINTAINED BY THE ASSESSEE. IT IS APPARENT FR OM THE RECORD THAT HE ASSESSEE DULY PRODUCED BOOKS OF ACCOUNT MAINTAINED DURING THE COURSE OF BUSINESS SUCH AS, CASH BOOK, LEDGER, BANK ACCOUNT A ND OTHER STATEMENTS AS REQUIRED BY THE A.O. THE ASSESSEE ALSO PRODUCED E VIDENCE OF COST OF CONSTRUCTION OF BUILDING SUCH AS BILLS OF STEEL, CE MENT, SAND, BRICKS, BAJRI, WOOD, ALUMINIUM SHEETS, VOUCHERS ON ACCOUNT OF LABO UR PAID. THESE FACTS HAVE BEEN DULY ACCEPTED BY THE A.O. AT PAGE 4 PARA 4 OF HIS ORDER. IT SEEMS AFTER EXAMINATION OF ALL ASPECTS OF THE CASE, THE A.O. ACCEPTED THE ACCOUNT BOOKS OF THE ASSESSEE. 9.2 IN VIEW OF THE FACTS AND THE CIRCUMSTANCES OF THE PRESENT CASE, WE HOLD THAT THE A.O. WAS NOT JUSTIFIED IN REFERRING THE MA TTER TO THE DVO WITHOUT BOOKS OF ACCOUNT BEING REJECTED AND, THEREFORE, REL IANCE PLACED ON THE REPORT OF THE DVO WAS MISCONCEIVED AND THE ORDERS OF THE L OWER AUTHORITIES ARE LIABLE TO BE SET ASIDE. WHILE TAKING SUCH A VIEW, W E ARE FORTIFIED BY THE 10 DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SARGAM CINEMA VS. CIT (2011) 241 CTR (SC) 179, WHEREIN THE HONBLE SU PREME COURT HELD AS UNDER:- 4. IN THE PRESENT CASE, WE FIND THAT THE TRIBUNAL DECIDED THE MATTER RIGHTLY IN FAVOUR OF THE ASSESSEE IN AS MUCH AS THE TRIBUNAL CAME TO THE CONCLUSION THAT THE ASSESSING AUTHORITY COULD N OT HAVE REFERRED THE MATTER TO THE DVO WITHOUT THE BOOKS OF ACCOUNT BEI NG REJECTED. IN THE PRESENT CASE, A CATEGORICAL FINDING IS RECORDED BY THE TRIBUNAL THAT THE BOOKS WERE NEVER REJECTED. THIS ASPECT HAS NOT BEEN CONSIDERED BY THE HIGH COURT. IN THE CIRCUMSTANCES, RELIANCE P LACED ON THE REPORT OF THE DVO WAS MISCONCEIVED. 9.3 FROM THE ABOVE JUDGMENT, IT IS CLEAR THAT THE HONB LE SUPREME COURT HAS RULED THAT WITHOUT THE BOOKS OF ACCOUNT BEING REJECTED, REFERENCE MADE TO THE DVO WAS NOT TENABLE. RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF SARGAM CINEMA VS. CIT (SUPRA), WE HOLD THAT NO ADDITION CAN BE MADE ON THE BASIS OF R EPORT OF THE DVO WITHOUT THE BOOKS OF ACCOUNT BEING REJECTED, WHEREIN EVERY EXPENDITURE RELATING TO THE CONSTRUCTION IS RECORDED AND THOSE BOOKS OF ACC OUNT HAVE NOT BEEN REJECTED BY THE A.O. UNDER SECTION 145 OF THE ACT. CONSEQUENTLY, WE DELETE THE IMPUGNED ADDITION AND DIRECT THE A.O. TO ACCEPT THE RETURNED INCOME. 10. SINCE WE HAVE DELETED THE IMPUGNED ADDITION A ND, THEREFORE, THE OTHER GROUNDS RAISED BY THE ASSESSEE NEED NO ADJUDICATION . 11. S.A.NO.2(ASR)/2011 (ARISING OUT OF ITA NO.339(A SR)/2010:- SINCE WE HAVE DECIDED THE APPEAL OF THE ASSESSEE AN D, THEREFORE, THE STAY APPLICATION FILED BY THE ASSESSEE HAS BECOME I NFRUCTUOUS AND ACCORDINGLY WE DISPOSE OF THE SAME AS DISMISSED. 11 12. IN THE RESULT, THE APPEAL IS ALLOWED AND THE ST AY APPLICATION NO.2(ASR)/2011 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH JUNE, 2011. SD/- SD/- (MEHAR SINGH) (H.L. KARWA) ACCOUNTANT MEMBER. VICE PRESIDENT. DATED: 13 TH JUNE, 2011. KC/- COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: M/S.CHOHAN RESORTS, TALWANDI BHAI, DI STT. FZR. (2) THE A.O., WARD 3(1), FZR. (3) THE CIT, BTD. (4) THE CIT(A), BTYD. (5) THE SR.D.R., ITAT, ASR. TRUE COPY BY ORDER ASSTT. REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, AMRITSAR.