Income Tax Officer-I, Faizabad V. Sri Gyan Prakash Motwani, Faizabad

ITA 423/LKW/2013

• Counselvise Citation: 42323714 RSA 2013
• Duration Of Justice: 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 21-10-2013
• Assessment Year: 2000-2001
• Appeal Filed On: 05-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALOK MITRA
• Assessee Lawyers: M P MISHRA
• Keywords: Reopening of assessment; Question of law; Valuation report
• Section: 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKN BENCH A : LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A. K. GARODIA , ACCOUNTANT MEMBER I.T.A. NO. 423 /LKW/201 3 ASSESSMENT YEAR :200 0 - 200 1 INCOME TAX OFFICER - 1, VS. SHRI GYAN PRAKASH MOTWANI, FAIZABAD. RAJENDRA NAGAR COLONY, MOUGHALPURA, FAIZABAD. PAN:AEOPP6710Q (APPELLANT) (RESPONDENT) I.T.A. NO. 424 /LKW/201 3 ASSESSMENT YEAR :2000 - 2001 INCOME TAX OFFICER - 1, VS. SHRI INDER KUMAR MOTWANI, FAIZABAD . RAJENDRA NAGAR COLONY, MOUGHALPURA, FAIZABAD. PAN:AETPK3713K (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ALOK MITRA, D.R. RESPONDENT BY : SHRI M. P. MISHRA, ADVOCATE DATE OF HEARING : 2 1 / 10 /2013 DATE OF PRONOUNCEMENT : 18/12/2013 ORDER PER SUNIL KUMAR YADAV: THESE APPEALS ARE PREFERRED BY THE REVENUE AGAINST THE RESPECTIVE ORDERS OF CIT(A) QUASHING THE ASSESSMENT ORDERS ON THE GROUND THAT THE ASSESSMENT WAS REOPENED ON THE BASIS OF VALUATION REPORT BY RAISING THE COMMON GROUNDS IN BOTH THE APPEALS THAT THE CIT (A) HAS ERRED IN LAW AND 2 ON FACTS IN MAKING THE ASSESSMENT ANNULLED BY IGNORING THE FACTS THAT ALL MATERIALS HAD BEEN BROUGHT BY THE ASSESSING OFFICER NECESSARY FOR INITIATION OF PROCEEDINGS U/S 147 OF THE I.T. ACT, 1961. 2. HAVING HEARD THE RIVAL SUBMISS IONS AND FROM A CAREFUL PERUSAL OF THE ORDERS OF THE LOWER AUTHORITIES, WE FIND THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2003 - 2004 IN THE CASE OF INDER KUMAR MOTWANI, THE BUILDING BALDEO PLAZA WAS REFERRED TO VALUATION OFF ICER, ALLAHABAD FOR ESTIMATING THE COST OF CONSTRUCTION THEREOF. THE VALUERS REPORT HAS BEEN RECEIVED ON 08/02/2006 ESTIMATING THE COST OF CONSTRUCTION AS UNDER: FINANCIAL YEAR DECLARED INVESTMENT BY ASSESSEE (RS) ESTIMATED COST OF CONSTRUCTION (RS) DI FFERENCE 1998 - 99 27,400.00 65,000.00 37,600.00 1999 - 00 11,15,977.00 26,50,900.00 15,34,923.00 2000 - 01 5,38,092.00 12,78,200.00 7,40,108.00 TOTAL 16,81,469.00 39,94,100.00 23,12,631.00 2.1 ON THE BASIS OF VALUATION REPORT, THE ASSESSMENT FOR THE ASSESSMENT YEAR 2000 - 2001 ARE REOPENED AND HAVING RELIED UPON THE VALUATION OFFICERS REPORT, THE ASSESSING OFFICER HAS MADE THE ADDITION OF RS.7,67,462/ - EACH IN THE HANDS OF BOTH THE ASSESSEES. SIMULTANEOUSLY, THE ASSESSMENT FOR THE ASSESSMENT YEAR 2001 - 2002 WAS ALSO REOPENED AND ADDITION OF RS.3,70,054/ - EACH WERE MADE IN THE HANDS OF BOTH THE ASSESSEES. 3. AGAINST THIS ADDITION, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A) AND PLACED HEAVY RELIANCE UPON THE VARIOUS JUDICIAL PRONOUNCEMENTS AND ALSO OF THE JURISDICTIONAL HIGH COURT IN SUPPORT OF HIS 3 CONTENTION THAT WHENEVER THE ASSESSMENT IS REOPENED ON THE BASIS OF VALUATION REPORT OF THE D.V.O., THE REOPENING IS BAD AND THE ASSESSMENT ORDER IS TO BE QUASHED. FINDING FORCE IN THE CONTENTION OF THE A SSESSEE, THE CIT(A) QUASHED THE ASSESSMENT ORDER HAVING HELD THAT THE NOTICE ISSUED U/S 148 OF THE ACT IS NOT PROPER AND THEREFORE, THERE WAS NO VALID JURISDICTION OF ASSESSMENT BY THE ASSESSING OFFICER. 4. AGGRIEVED, THE REVENUE HAS PREFERRED AN APPEAL B EFORE THE TRIBUNAL AND PLACED HEAVY RELIANCE UPON THE ASSESSMENT ORDER WHEREAS RELIANCE IS PLACED UPON THE ORDER OF CIT(A) BY THE ASSESSEE. 5. WE HAVE CAREFULLY EXAMINED THE ORDERS OF THE LOWER AUTHORITIES. WE FIND THAT THE ASSESSEE HIMSELF HAS DECLARED THE INVESTMENT DURING THE FINANCIAL YEAR 1998 - 99, 1999 - 2000 AND 2000 - 2001 AND THE SAME WAS ACCEPTED BY THE REVENUE WHILE COMPLETING THE ASSESSMENT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2003 - 2004, A REFERENCE WAS MADE TO D.V. O. IN THE CASE OF INDER KUMAR MOTWANI FOR ESTIMATING THE COST OF CONSTRUCTION AND ON THE BASIS OF D.V.O.S REPORT, THE ASSESSMENT WAS REOPENED IN HANDS OF BOTH THE ASSESSEES. ON CAREFUL PERUSAL OF THE ORDERS OF THE LOWER AUTHORITIES, WE DO NOT FIND ANY OT HER MATERIAL ON THE BASIS OF WHICH THE ASSESSING OFFICER HAS FORMED A REASONABLE BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED THE ASSESSMENT. THE SOLITARY EVIDENCE FOR FORMATION OF BELIEF WAS ONLY THE REPORT OF THE D.V.O. THERE IS NO INDEPENDENT APPL ICATION OF MIND FOR FORMATION OF BELIEF BY THE ASSESSING OFFICER THAT INCOME CHARGEABLE TO TAX IN THE HANDS OF THE ASSESSEES HAS ESCAPED ASSESSMENT. THE CIT(A) HAS ALSO REFERRED THE VARIOUS JUDICIAL PRONOUNCEMENTS IN WHICH IT HAS BEEN 4 CATEGORICALLY HELD T HAT THE OPINION OF THE D.V.O. PER SE IS NOT INFORMATION FOR THE PURPOSE OF REOPENING OF AN ASSESSMENT U/S 147 OF THE ACT. THE ASSESSING OFFICER HAS TO APPLY HIS MIND TO THE INFORMATION, IF ANY, COLLECTED AND MUST FORM BELIEF THEREOF. IN THE LIGHT OF THES E JUDGMENTS, WE ARE ALSO OF THE CONSIDERED VIEW THAT WHEREVER THE ASSESSMENT IS REOPENED SOLELY ON THE BASIS OF REPORT OF THE D.V.O., THE REOPENING IS BAD AS IT IS NOT BASED ON THE FORMATION OF BELIEF OF THE ASSESSING OFFICER THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT AND IN SUCH A SITUATION, THE ASSESSMENT DESERVES TO BE QUASHED. THE CIT(A) HAS ALSO MADE A REFERENCE TO VARIOUS JUDICIAL PRONOUNCEMENTS ALONG WITH HIS REASONS AND FOR THE SAKE OF REFERENCE, WE EXTRACT THE SAME AS UNDER: 4.1 (I) DECISION OF HON'B L E SUPREME COURT IN ACIT Y. DHARIA CONSTRUCTION CO., [ 2011 ] 197TAXMANN202(SC) 'SECTION 147 OF THE INCOME - TAX ACT, 1961 - INCOME ESCAPING ASSESSMENT - NON - DISCLOSURE OF PRIMARY FACTS - WHETHER OPINION OF DISTRICT VALUATION OFFICER (DVO) PER SE IS NOT AN INFORMATION FOR PURPOSES OF REOPENING OF AN ASSESSMENT UNDER SECTION 147; ASSESSING OFFICER HAS TO APPLY HIS MIND TO INFORMATION, IF ANY, COLLECTED AND MUST FORM A BELIEF THEREON - HELD, YES ' ( II) DECISION OF HONBLE ALLAHABAD HIGH COURT IN M/S FUSION ELECTRONICS PVT. LTD. V. INCOME TAX DEPARTMENT & OTHERS, [WRIT PETITION NO. 11055 OF 2009 (M/B)] 'IN THE LIGHT OF ABOVE SETTLED POSITION, WE SET ASIDE THE IMPUGNED NOTICE ISSUED BY THE DEPARTMENT UNDER SECTION 24 8 OF T HE INCOME TAX ACT AS THE SAME WAS ISSUED SOLELY BASED ON DVO'S REPORT'. 5 (III) T HE DECISION OF THE HONBLE ITAT, LUCKNOW BENCH 'A', LUCKNOW IN ITA NO. 433/LUC/08, DATED 24.10.2008, AY 2000 - 01 IN THE CASE OF ITO V. MAHARANI DEEN PANDEY IN THE AFO RESAID CASE THE ORIGINAL RETURN WAS FILED BY THE ASSESSEE ON 30.03.2001 . THE SAID RETURN WAS PROCESSED U/S 143(1) ON 23.07.2001. THE ASSESSING OFFICER ISSUED THE NOTICE U/S 148 ON 29/03/2005 . THE HONBLE TRIBUNAL HAS HELD THAT THE REPORT OF THE D.V.O. WAS ONLY BASIS FOR ISSUING NOTICE U/S 148 OF THE I . T. ACT, 1961, THEREF O RE, THE REASSESSMENT WAS NOT VALID. (IV) THE DECISION OF THE HON'BLE IT AT, LUCKNOW BENCH 'B', LUCKNOW IN ITA NOS . 259 & 260 /LUC/10, DATE 26.10.2010, AYS 2002 - 02 & 2003 - 04 IN THE CASE OF IT O FAIZABAD V. SHREE RAM VERMA AFTER CONSIDERING VARIOUS DECISIONS ON THE SUBJECT THE HON'BLE ITAT HAS HELD AS FOLLOWS: 'WE, THEREFORE, CONSIDERING THE TOTALITY OF THE FACTS AND VARIOUS JUDICIAL PRONOUNCEMENT DISCUSSED HEREIN ABOVE, ARE OF THE CONFIRMED VIEW THAT THE LEARNED CIT(A) WAS FULLY JUSTIFIED IN SETTING ASIDE THE ASSESSMENT ORDERS PASSED BY THE ASSESSING OFFICER BY REOPENING THE ASSESSMENT U/S 147 OF THE ACT SOLELY ON THE BASIS OF THE DVO'S REPORT. ACCORDINGLY, WE DO NOT SEE ANY MERIT IN THESE APPEALS OF THE DEPARTMENT . (V) DECISION OF HON'BLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF CTT V S . SMT. USHA MATHUR, [2001] 252 ITR 179 (P&H). THE ASSESSEE HAS FILED HER RETURN OF INCOME FOR THE ASSESSMENT YEAR 1989 - 90. THE ASSESSMENT WAS COMPLETED U/S 143(1). THE ASSESSEE ALONG WITH HER HUSBAND CONSTRUCTED A HOUSE. DURING THE ASSESSMENT PROCEEDINGS IN THE CASE OF ASSESSEE'S HUSBAND, THE ASSESSING OFFICER REFERRED THE MATT ER TO THE VALUATION CELL. ON THE BASIS OF THE VALUATION REPORT THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 148 TO THE ASSESSEE AND REOPENED HER CASE. ON APPEAL , THE APPELLATE 6 TRIBUNAL HELD THAT THE VALUATION REPORT CANNOT BE MADE THE BASIS FOR REOPEN ING THE ASSESSMENT. ON AN APPEAL BY THE REVENUE, THE HON'BLE PUNJAB AND HARYANA HIGH COURT HAS HELD THAT NO SUBSTANTIAL QUESTION OF LAW AROSE FOR CONSIDERATION AND THAT NO ERROR HAS BEEN POINTED OUT IN THE DETAILED FINDING OF FACT RECORDED BY THE TRIBUNAL. ' (VI) CTT V S . K. RAJPANDIAN, [2009] 311 ITR 477( MAD.) REASSESSMENT - VALIDITY OF REASSESSMENT - CONSTRUCTION OF BUILDING - REASSESSMENT BASED ON REPORT OF DEPARTMENTAL VALUATION OFFICER - NOT VALID - INCOME - TAX ACT, 1961, SS.147,148. 4. 2 THE APPELLANT HAS SUBMITTED THAT THE REASONS RECORDED, CLEARLY SHOW THAT THE REPORT OF THE DEPARTMENTAL VALUATION OFFICER IS THE ONLY BASIS FOR REOPENING OF THE ASSESSMENT. HENCE IN VIEW OF THE ABOVEMENTIONED DECISIONS , THE INITIATION OF THE PROCEEDINGS U/S 147 OF THE ACT IS NOT VALID AND CONSEQUENTLY, THE IMPUGNED ASSESSMENT ORDER PASSED U/S 147 /143(3) OF THE ACT IS ILLEGAL AND MAY BE QUASHED. 5. I HAVE CONSIDERED THE FACTS OF THE CASE, GROUNDS OF APPEAL AND SUBMISSIONS FILED BY THE ASSESSEE. IT IS A FACT THAT IN THE PRESENT CASE THE AO HAS ISSUED NOTICE U/S 148 OF THE ACT SOLELY ON THE BASIS OF DVO'S REPORT ESTIMATING THE INVESTMENT IN CONSTRUCTION OF BUILDING KNOWN AS BALDEV PLAZA BY THE APPELLANT. 5.1 VARIOUS BENCHES OF HON'BLE INCOME TAX APPELLATE TRIBUNAL, HON'BLE HIGH COURTS AS WELL AS HON'BLE SUPREME COURT ARE UNANIMOUS IN THEIR VIEW THAT THE ASSESSING OFFICER IS NOT JUSTIFIED IN REOPENING THE ASSESSMENT PROCEEDINGS SOLELY ON THE BASIS OF THE OPINION OF THE DVO IN DICATING HIGHER VALUATION OF INVESTMENT THAN THAT OF DISCLOSED BY THE APPELLANT. IN OTHER WORDS THE VALUATION REPORT OF THE DVO CANNOT BE THE SOLE REASON FOR REOPENING THE ASSESSMENT FOR THE PURPOSE OF SECTION 147 OF THE ACT. 7 5.2 IN THE INSTANT CASE, THE REASONS RECORDED BY THE AO SHOW THAT THERE WERE NO OTHER REASONS AVAILABLE WITH THE AO EXCEPT THE REPORT OF DVO WHICH SHOWED THE VALUATION OF CONSTRUCTION IN THE BUILDING 'BALDEV PLAZA' HIGHER THAN THE INVESTMENT DISCLOSED BY THE APPELLANT. IN VIEW OF THE JUDICIAL PRONOUNCEMENTS REFERRED SUPRA, I FIND THAT THE REASONS RECORDED BY THE AO CANNOT BE CONSTRUED AS VALID REASONS FOR REOPENING OF ASSESSMENT AS THESE ARE BASED SOLELY ON THE REPORT OF THE DVO. SINCE, THE REASONS RECORDED BY THE AO FOR REOPENING OF A SSESSMENT ARE INSUFFICIENT AS HELD BY VARIOUS COURTS; THE NOTICE ISSUED UNDER SECTION 14 8 OF THE ACT IS NOT PROPER AND THERE WAS NO, VALID ASSUMPTION OF THE JURISDICTION BY THE AO. I ACCORDINGLY ANNUL THE IMPU GNED ASSESSMENT ORDER PASSED BY THE AO, HOLDING IT AS ILLEGAL AND NOT AS PER LAW. 6. SINCE WE FIND OURSELVES IN AGREEMENT WITH CIT(A), WE CONFIRM HIS ORDER. 7. IN THE RESULT, THE APPEALS OF THE REVENUE ARE DISMISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 18/12/2013 ) SD/. SD/. (A. K. GARODIA) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 18/12/2013 *CL SINGH COPY FORWARDED TO THE: 1. APPELLANT. 2. RESPONDENT. 3. CIT (A) 4. CIT 5. DR. ASSISTANT REGISTRAR