Mr. Subhash Sharma, New Delhi V. DCIT, New Delhi

ITA 353/DEL/2012

• Counselvise Citation: 35320114 RSA 2012
• Duration Of Justice: 9 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 23-08-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 24-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIRANJAN KOULI
• Keywords: Reopening of assessment; Value adopted by valuation officer; Gift; Cost of acquisition; Difference of opinion; Valuation report; Validity of assessment; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 54F; 153A; 147; 69; 148; 154; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : G : NEW DELHI SHRI I. C. SUDHIR, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER ITA NO. 353/DEL/2012 ASSESSMENT YEAR: 2005- 2006 MR. SUBHASH SHARMA VS. DCIT, CENTRAL CIRCLE-25 4374, KATRA RAIJI, NEW DELHI. PAHARGANJ, NEW DELHI. PAN ABIPS0489A (APPELLANT) (RES PONDENT) APPELLANT BY : SHRI V.K. BINDAL, SHR I S.K. BINDAL, CAS RESPONDENT BY : SHRI NIRANJAN KOULI, CIT D R ORDER PER I.C. SUDHIR, JUDICIAL MEMBER THE ASSESSEE HAS PREFERRED PRESENT APPEAL ON THE FOLLOWING GROUNDS :- 1. THE CIT (APPEALS) ERRED IN LAW AND ON FACTS IN CONFIRMING THE VALIDITY OF NOTICE U/S 148/147 OF THE ACT TO REASSE SS INCOME ALREADY ASSESSED U/S 153A. THUS, THE REASSESSMENT O RDER SO FRAMED U/S 147/143(3)/153A IS BAD IN LAW AND SHOULD BE ANNULLED. 2. THE CIT (APPEALS) ERRED IN LAW AND ON FACTS IN C ONFIRMING THE VALIDITY OF NOTICE U/S 148 OF THE ACT DESPITE THAT THE REASONS TO BELIEVE WERE RECORDED SOLELY ON THE BASIS OF THE DVO VALUATION REPORTS ESTIMATING HIGHER VALUATION OF TW O BUILT-UP HOUSE PROPERTIES; EVEN WHEN A) NO DOCUMENTARY EVIDENCE FOR MAKING ALLEGED UN DERHAND ITA NO. 353/DEL/2012 2 PAYMENT(S) WAS FOUND OR SEIZED DURING THE S EARCH, B) WITHOUT EXAMINING THE SELLERS OF THE IMPU GNED PROPERTIES, AND C) MERELY ON SUSPICION OF ESCAPEMENT OF INCOME SO LELY ON THE BASIS OF THE DVO VALUATION REPORT, WHIC H IS ONLY A CHANGE IN OPINION SINCE THE ASSESSMENT U/S 15 3A STOOD COMPLETED AND COST OF ACQUISITION DECLA RED BY THE APPELLANT HAD BEEN ACCEPTED. THUS, THE INITIATION OF REASSESSMENT PROCEEDINGS IS BAD IN LAW AND THE REASSESSMENT ORDER SO FRAMED SHOULD BE ANNULLED. 3. THE CIT (APPEALS) ERRED IN LAW AND ON FACTS IN REJECTING THE PLEA OF THE APPELLANT ON CONJECTURES AND SURMIS ES, WHICH WAS TAKEN WITHOUT PREJUDICE TO THE GROUNDS ABOVE TH AT EVEN IF THE IMPUGNED PROPERTIES ARE HELD AS UNDERVALUED, THEN ALSO THE DIFFERENTIAL SUMS COULD AT BEST BE ASSESSE D AS GIFTS UNDER THE PROVISIONS OF THE GIFT TAX ACT IN THE HAN DS OF THE SELLERS. THUS, THE ADDITION FOR UNEXPLAINED INVESTM ENT U/S 69 MUST BE DELETED. 4. THE CIT (APPEALS) ERRED IN LAW AND ON F ACTS IN CONFIRMING THE ADDITION OF RS. 30,44,5001-U/S 69 SIMP LY ON THE FOLLOWING COUNTS: A) THAT NO OBJECTIONS WERE FILED BEFORE THE DVO, B) THAT OWN VALUATION REPOR TS WERE NOT SUBMITTED, AND C) THAT THE BILLS FOR CONST RUCTION WERE NOT SUBMITTED; WHILE IGNORING THAT DVO NEVER CALLED FOR ANY OBJECT IONS AND THE IMPUGNED PROPERTIES WERE BOUGHT AS BUILT-UP HOU SES; AND ALSO EVEN WHEN THE DVO VALUATION REPORTS SUFFER ED FROM GLARING DEFECTS. THUS, THE ADDITION SO MADE SHOULD BE DELETED. 5. THE CIT (APPEALS) ERRED IN LAW AND ON FACTS IN CONFIRMING THE VALIDITY OF NOTICE U/S 148 OF THE AC T DESPITE THAT THE PROCEEDINGS U/S 154 WERE ALREADY IN PROCES S FOR RECTIFICATION OF THE THIRD REASON TO BELIEVE ON EXE MPTION ITA NO. 353/DEL/2012 3 ALLOWED U/S 54F AND THE APPELLANT NOT ONLY HAD AGRE ED TO THE SAME BUT HAD ALSO DEPOSITED THE RESULTANT TAX DUE. THUS, INITIATION OF REASSESSMENT PROCEEDINGS FOR RECTIFYI NG A MISTAKE APPARENT ON RECORD IS BAD IN LAW AND THE REASSESSMENT ORDER SO FRAMED SHOULD BE ANNULLED. 6. THE CIT (APPEALS) ERRED IN LAW AND ON FACTS IN NOT GRANTING THE EXEMPTION U/S 54F EQUIVALENT TO THE NE T CONSIDERATION ON SALE OF SHARES HELD AS LONG TERM C APITAL ASSETS DESPITE CONFIRMING THE ENHANCEMENT MADE IN T HE ACQUISITION COST OF THE NEW HOUSE BOUGHT IN EAST MO DEL TOWN BY ASSERTING THAT SINCE SECTION 69 IS A DEEMING PRO VISION AN ADDITION MADE UNDER THAT SECTION CANNOT BE IMPOSED FOR CLAIMING EXEMPTION U/S 54F. THUS, WITHOUT PREJUDICE TO THE ABOVE GROUNDS IF IN CASE THE ADDITION MADE FOR ACQU ISITION OF THE SAID PROPERTY IS UPHELD, ADDITIONAL EXEMPTION U /S 54F SHOULD ALSO BE ALLOWED AS PER THE ASSESSED ACQUISIT ION COST. 7. WITHOUT PREJUDICE TO THE ABOVE GROUNDS , THE CIT (APPEALS) (APPEALS) ERRED IN LAW AND ON FACTS IN NOT ISSUING DIRECTIONS TO THE AO REGARDING GRANTING OF TAX REBATE OF RS. 7 ,461/- U/S 88 AS PER LAW, LE., IF THE GROSS TOTAL INCOME IS FI NALLY ASSESSED BELOW RS. 5 LACS. 2. IN THE GROUNDS THE ASSESSEE HAS QUESTIONED THE VALIDITY OF ASSESSMENT ORDER ON SEVERAL GROUNDS. ONE OF THE GRO UNDS I.E. GROUND NO. 2 IS AGAINST THE INITIATION OF REOPENING OF THE AS SESSMENT ON THE BASIS OF VALUATION REPORT OF THE DVO WHICH WAS REFERRED TO H IM DURING THE PENDENCY OF THE ASSESSMENT U/S 153A BUT WAS FURNISHED AFTER FRAMING OF THE ASSESSMENT. 3. LD. AR HAS ADDRESSED THE BENCH ON AL L THE GROUNDS RAISED AND IN SUPPORT OF GROUND NO. 2 HE HAS CITED DECISIONS, ON E OF WHICH IS OF HONBLE SUPREME COURT IN THE CASE OF ACIT VS. DHARIYA CONST RUCTION COMPANY (2010) 328 ITR 515 (SC). HIS CONTENTION ALSO REMAIN S THAT IN ABSENCE OF ITA NO. 353/DEL/2012 4 INCRIMINATING MATERIAL FOUND DURING THE COURSE OF S EARCH, THE ADDITION MADE U/S 69 OF THE ACT ON ACCOUNT OF UNEXPLAINED INVESTM ENT AT RS. 30,44,500/- WAS NOT JUSTIFIED. IN SUPPORT HE PLACED RELIANCE ON THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ALL CA RGO GLOBAL LOGISTICS LTD. VS. DCIT, ITA NOS. 5018 TO 5022 AND 5059/MUM/2010 O RDER DATED 6.7.2012 AND THE DECISION OF PUNE BENCH OF TRIBUNAL IN THE C ASE OF BHARATI VIDYAPEETH VS. ACIT ITA NOS. 916 & 1037 PUNE 2010 DATED 23.1.2012. HE HAS ALSO PLACED RELIANCE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD. 320 ITR 56 1 (SC) HOLDING THAT IF THE CONCEPT OF CHANGE OF OPINION IS REMOVED, REVENUE WOULD TAKE PLACE IN THE GARB OF REOPENING OF ASSESSMENT. 4. LD. DR ON THE OTHER HAND TRIED TO JUSTIFY THE ORDERS OF THE AUTHORITY BELOW ON THE ISSUE OF THE VALIDITY OF THE ASSESSMEN T FRAMED U/S 147 READ WITH SECTION 143(3) OF THE ACT AND ON THE VALIDITY OF INITIATION OF REOPENING PROCEEDINGS U/S 148 OF THE ACT. THE LD. DR ALSO PLA CED RELIANCE ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANIL KUMAR BHATIA 2012-TIOL-641-HC-DEL-IT. THE LD. DR ALSO PLA CED RELIANCE ON THE FOLLOWING DECISIONS :- HARVEY HEART HOSPITALS LTD. VS. ACIT 130TTJ (CHENN AI) 700, SHIVANATH RAI HARNARAIN (INDIA) LTD. VS. DCIT 117 I TD 74(DELHI). 5. IN REJOINDER LD. AR SUBMITTED THAT FACTS IN THE CASE OF CIT VS. ANIL KUMAR BHATIA (SUPRA) RELIED UPON BY THE LD. DR ARE DISTINGUISHABLE. HENCE ITA NO. 353/DEL/2012 5 IT IS NOT HELPFUL TO THE REVENUE. HE SUBMITTED THAT THE DECISION IN THE CASE OF HARVEY HEART HOSPITALS LTD. VS. ACIT (SUPRA) AND SHIVANATH RAI HARNARAIN (INDIA) LTD. VS. DCIT (SUPRA) RELIED UPON BY THE LD. DR HAVE BEEN DISTINGUISHED BY THE SPECIAL BENCH OF THE TRIB UNAL IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD. VS. DCIT (SUPRA) HOLDI NG THAT IN ALL CASES WHERE ASSESSMENTS HAVE NOT BEEN AWARDED, THE ASSESSMENT U /S 153A WILL BE MADE ON THE BASIS OF INCRIMINATING MATERIAL, WHICH MEANS (I) BOOKS OF ACCOUNT, OTHER DOCUMENTS FOUND IN THE COURSE OF SEA RCH BUT NOT PRODUCED IN THE COURSE OF ORIGINAL ASSESSMENT AND (II) UNDIS CLOSED INCOME OR PROPERTY DISCOVERED IN THE COURSE OF SEARCH. 6. CONSIDERING THE ABOVE SUBMISSIONS AND HA VING GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW, MATERIAL AVAILABLE ON RECORD AND DECISIONS RELIED UPON WE FIND THAT THE ISSUE RAISED IN GROUND NO. 2 IS FULLY COVERED BY THE DECISION OF HONBLE SUPREME COURT IN THE CAS E OF ACIT VS. DHARIYA CONSTRUCTION COMPANY (SUPRA) RELIED UPON BY THE LD . AR. THE RELEVANT FACTS OF THE PRESENT CASE BEFORE US ARE THAT DURING THE COURSE OF SEARCH PURCHASED DEED OF TWO BUILT-UP HOUSE PROPERTIES WER E FOUND AND SEIZED VIDE PAGE NOS. 103 TO 136 ANNEXURE A 1 (PARTY H-4 ). THE ASSESSMENT WAS FRAMED U/S 153A VIDE ORDER DATED 31.12.2008 ASSESSI NG TOTAL INCOME OF RS. 8,57,235/- BY DISALLOWING EXCESS EXEMPTION OF RS. 6 ,76,364/- CLAIMED U/S 54F. SUBSEQUENTLY THE AO FOUND THAT EXEMPTION ALLOW ABLE U/S 54F WHICH WAS WRONGLY COMPUTED IN THE ASSESSMENT ORDER AND WA S ALLOWED IN EXCESS ITA NO. 353/DEL/2012 6 BY RS. 1,86,052/-. NOTICE U/S 154/155 WAS ISSUED ON 10.3.2010 TO RECTIFY THE SAID MISTAKE. THE SAID MISTAKE WAS ADMITTED ON RECORD BY THE ASSESSEE. RS. 21,520/- WAS DEPOSITED BY THE ASSESSEE TOWARDS THE EXCESSIVE ALLOWANCE OF EXEMPTION U/S 54F OF RS. 1,86,052/-. B EFORE CONCLUDING THE PROCEEDINGS U/S 154, THE AO ISSUED ANOTHER NOTICE U /S 148 DATED 30.3.2010. THE ASSESSEE FILED RETURN OF INCOME U/S 147 ON 10.5.2010 DECLARING TOTAL INCOME OF RS. 10,43,288/-. REASONS TO BELIEVE RECORDED ON 30.03.2010 WERE SUPPLIED ON REQUEST TO THE ASSESSE E VIDE LETTER DATED 20.5.2010 BY THE AO. FOLLOWING THREE REASONS WERE R ECORDED FOR INITIATION OF REASSESSMENT PROCEEDINGS :- (I) THAT WHEREAS THE ASSESSEE HAD DECLARED THE COST OF ACQUISITION OF HOUSE PROPERTY NO. R-12/9-C, RAJ NAG AR, GHAZIABAD (UP) AT RS. 24,00,000/- ( EXCLUDING STAMP DUTY, ETC.) IT WAS VALUED AT RS. 30,71,200/- BY THE D.V.O. VIDE LETTER DATED 03/02/10; (II) THAT WHEREAS THE ASSESEE HAD DECLARED TH E COST OF ACQUISITION OF HOUSE PROPERTY NO. 35-36, EAST MODEL TO WN, GHAZIABAD (U) AT RS. 29,00,000/- (EXCLUDING STAMP DUTY , ETC.), IT WAS VALUED AT RS. 52,73,300/- BY THE D.V.O. VIDE LETTE R DATED 03/02/10 ; AND (III) THAT THE AO HAD ALLOWED EXEMPTION OF RS . 32,00,020/- U/S 54F(B) INSTEAD OF RS. 30,13,947/- IN THE ASSES SMENT ORDER FRAMED U/S 153A. 7. THE ASSESSEE RAISED OBJECTIONS AGAINST NO TICE U/S 148 AND REQUESTED FOR SUPPLY OF THE RELEVANT DVO (VALUATION REPORT). THE AO VIDE HIS ORDER DATED 30.11.2010 REJECTED THE OBJECTIONS RAISED BY THE ASSESSEE AND COPIES OF THE DVO WAS SUPPLIED TO THE ASSESSEE. THE ASSESS EE PARTICIPATED IN THE REASSESSMENT PROCEEDINGS SUBJECT TO THE OBJECTIONS RAISED BY HIM IN THIS REGARD VIDE ORDER DATED 2.6.2010 BEFORE THE AO. THE AO REASSESSED THE ITA NO. 353/DEL/2012 7 INCOME OF THE ASSESSEE AT RS. 40,87,787/- VIDE ORDE R DATED 16.12.2010 U/S 147/143(3)/153A OF THE ACT. THE ASSESSEE QUESTIONED THE SAID ASSESSMENT FRAMED ON 16.12.2010 BEFORE THE LD. CIT(A) BUT COUL D NOT SUCCEED IN ITS APPEAL. 8. IT IS VERY MUCH APPARENT FROM THE REASONS RECORDED THAT REOPENING HAS BEEN INITIATED ON THE BASIS OF DVO REPORT FILED BEFORE THE AO AFTER THE COMPLETION OF ASSESSMENT U/S 153A OF THE ACT. THE H ONBLE SUPREME COURT IN THE CASE OF ACIT VS. DHARIYA CONSTRUCTION COMPAN Y (SUPRA) RELIED UPON BY THE LD. AR HAS BEEN PLEASED TO HOLD THAT THE OPI NION GIVEN BY THE DISTRICT VALUATION OFFICER IS NOT PER SE INFORMATI ON FOR THE PURPOSE OF REOPENING AND ASSESSMENT U/S 147 OF THE I.T. ACT 19 61. IN THAT CASE BEFORE THE HONBLE SUPREME COURT THE DEPARTMENT HAD SOUGHT REOPENING OF THE ASSESSMENT BASED ON THE OPINION GIVEN BY THE DISTRI CT VALUATION OFFICER (DVO). HONBLE SUPREME COURT HELD FURTHER THAT THE AO HAS TO APPLY HIS MIND TO THE INFORMATION, IF ANY, COLLECTED AND MUST FORM A BELIEF THEREON. THE APPEAL PREFERRED BY THE DEPARTMENT WAS ACCORDIN GLY DISMISSED BY THE HONBLE SUPREME COURT WITH THIS FINDING THAT THE DE PARTMENT IS NOT ENTITLED TO REOPEN THE ASSESSMENT. LIKEWISE IN THE CASE OF C IT VS. V.T. RAJENDRAN (SUPRA) THE ASSESSEE HAD CONSTRUCTED A KALYAN MANDA PAM DECLARING TOTAL INVESTMENT AT RS. 90,17,190/- IN DIFFERENT ASSESSME NT YEARS. THE AO REFERRED THE MATTER TO THE DVO. HOWEVER BEFORE RECE IVING THE VALUATION REPORT HE FRAMED THE ASSESSMENT. THEREAFTER THE DVO ESTIMATED THE COST OF ITA NO. 353/DEL/2012 8 CONSTRUCTION AT RS. 1,23,96,000/-. AFTER ALLOWING C ERTAIN DEDUCTION FROM THE ESTIMATE MADE BY THE DVO, THE AO REDUCED THE COST O F CONSTRUCTION AT RS. 1,08,51,700/-. ACCORDINGLY BASED UPON THE ABOVE DIF FERENCE IN THE COST OF CONSTRUCTION OF THE KALYAN MANDAPAM, THE AO REOPENE D THE ASSESSMENT FOR THE ASSESSMENT YEARS UNDER SECTION 143(3) R/W S. 14 7 OF THE ACT ON THE GROUND THAT HE HAD REASON TO BELIEVE THAT THERE WAS ESCAPED ASSESSMENT DUE TO THE FAILURE OF THE ASSESEE TO DECLARE THE IN VESTMENT MADE BY HIM IN THE CONSTRUCTION OF KALYAN MANDAPAM. HENCE A NOTICE U/S 148 WAS ISSUED AND THEREAFTER, THE AO ASSESSED THE VALUE TO THE EF FECT THAT THERE IS DIFFERENCE IN THE COST OF CONSTRUCTION AS SHOWN IN THE RESPECTIVE ASSESSMENT ORDERS. THE HONBLE MADRAS HIGH COURT WAS PLEASED T O HOLD THAT VALUATION REPORT OF DVO CAN NOT BE MADE THE BASIS FOR REOPENI NG THE ASSESSMENT. WE THUS RESPECTFULLY FOLLOWING THE DECISION OF HON BLE SUPREME COURT IN THE CASE CIT VS DHARIYA CONSTRUCTION (SUPRA) HOLD THAT THE INITIATION OF REOPENING PROCEEDINGS ON THE BASIS OF DVO REPORT AS STATED IN THE REASON NOS. (I) (II) REPRODUCED HEREIN ABOVE WAS NOT JUSTI FIED HENCE THE ASSESSMENT FRAMED ON 16.12.2010 IN FURTHERANCE THER ETO WAS ALSO NOT JUSTIFIED. SO FAR AS REASON NO. (III) IS CONCERNED THE ASSESSEE HAD ACCEDED THERETO AND HAD DEPOSITED TAX AT RS. 1,86,052/- ON ACCOUNT OF EXCESSIVE ALLOWANCE OF EXEMPTION U/S 54F OF THE ACT IN RESPON SE TO THE NOTICE ISSUED U/S 154 OF THE ACT ON 10.3.2010 I.E. WELL BEFORE TH E ISSUANCE OF NOTICE U/S 148 OF THE ACT ON 30.3.2010. WE THUS HOLD THAT THE ASSESSMENT FRAMED U/S ITA NO. 353/DEL/2012 9 147 / 143(3)/153A OF THE ACT ON 16.12.2010 BASED ON INVALID INITIATION OF REOPENING OF THE PROCEEDINGS IS NULL AND VOID. IT I S ORDERED ACCORDINGLY. IN VIEW OF THIS FINDING ON THE VALIDITY OF THE ASSESSM ENT IN QUESTION ISSUES RAISED IN THE REMAINING GROUNDS HAVE BECOME INFRUCT UOUS AND THUS THESE GROUNDS DOES NOT NEED ADJUDICATION. 9. CONSEQUENTLY THE APPEAL IS ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 22.11.2012. SD/- SD/- (T.S. KAPOOR) ( I.C. SUDHIR ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 22.11.2012 *VEENA COPY OF ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER DEPUTY REGISTRAR, ITAT