I N THE INCOME TAX APPELLATE TRIBUNAL DELHI G BENCH BEFORE SHRI RAJPAL YADAV, JM & SHRI A.N. PAHUJA, AM I.T.A NO. 4310/DEL/2011 ASSTT. YEAR 2005-06 ITO,WARD-4, KARNAL V/S . SHRI GURU RAM DASS RICE CO. KAITHAL ROAD, KARNAL [PAN : AAFFS0720A ] (APPELLANT) (RESPONDENT) ASSESSEE BY NONE REVENUE BY SMT. S. MOHANTHY, DR DATE OF HEARING 30-11-2011 DATE OF PRONOUNCEMENT 30-11-2011 O R D E R. A.N.PAHUJA :- THIS APPEAL FILED ON 29 TH SEPTEMBER, 2011 BY THE REVENUE AGAINST AN ORDER DATED 18 TH JULY, 2011 OF THE LD. CIT(A)- KARNAL, RAISES THE F OLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) HAS ERRED IN HOLDING THAT PROCEEDINGS INITIATED U/S 147 OF THE INCOME TAX ACT IS NOT AS PER LAW AND HENCE JURISDICTION ASSUMED BY TH E AO PER ISSUE OF NOTICE U/S 148 IS ALSO INVALID WITHOUT APPRECIATING PROPERLY THAT AFTER THE SUBSTITUTION OF PHRASE HAS REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSTT. FOR ANY ASSTT. YEAR BY T HE DIRECT TAX LAWS (AMENDMENT) ACT, 1989,W.E.F. 1.4.1989, THE JUDGMENT S RELIED UPON BY THE LD. CIT(A) ARE DISTINGUISHABLE. 2. THE APPELLANT CRAVES LEAVE TO ADD OR AMEND THE G ROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD OR DISPOSED OF. 2. FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THA T RETURN DECLARING INCOME OF ` ` 2,37,848/- FILED ON 29 TH OCTOBER, 2005 BY THE ASSESSEE, AFTER BEING PROCESS ED ON 22 ND DECEMBER, 2005 U/S 143(1) OF THE INCOME TAX ACT 19 61 (HEREINAFTER REFERRED TO AS THE ACT) WAS SELECTED FOR SCRUTINY WITH THE SERV ICE OF A NOTICE U/S 143(2) OF THE ACT AND THE ASSESSMENT WAS COMPLETED U/S 143 (3) OF THE ACT VIDE ORDER DATED 24 TH DECEMBER, 2007 ON AN INCOME OF ` ` 3,76,616/-. SUBSEQUENTLY, DURING THE COURSE OF ASSESSMENT. PROCEEDINGS FOR THE AY 2006-07, THE ASS ESSING OFFICER[AO IN SHORT] NOTICED THAT THE ASSESSEE CONSTRUCTED RICE SHELLER BUILDING WITH AN INVESTMENT OF ` ` ` 21,61,172/- IN THE FY 2005-06 AND AN AMOUNT OF ` ` ` 17,37,148/- WAS INCURRED IN THE ITA NO. 4310/DEL/11 2 YEAR UNDER CONSIDERATION. IN ORDER TO ASCERTAIN THE ACTUAL INVESTMENT IN THE BUILDING, THE AO MADE A REFERENCE U/S 142A OF THE ACT TO THE DVO, CHANDIGARH ,WHO VIDE HIS REPORT DATED 15/17 TH DECEMBER, 2008 ESTIMATED THE ACTUAL INVESTMENT OF ` ` 34,32,123/- IN THE YEAR UNDER CONSIDERATION AS AGAI NST ` ` ` 17,37,148/- SHOWN BY THE ASSESSEE. ON THE BASIS OF ESTIMATE MADE BY THE DVO, THE AO AFTER RECORDING REASONS IN WRITING AND AFTER TAKING APPROVAL OF ADD ITIONAL CIT,KARNAL REOPENED THE ASSESSMENT U/S 147 OF THE ACT WITH THE ISSUE OF A N OTICE DATED 18 TH MARCH, 2010 U/S 148 OF THE ACT. IN RESPONSE, THE ASSESSEE FILED THE RETURN DECLARING INCOME OF ` ` 2,37,848/- ON 20 TH APRIL, 2010. DURING THE COURSE OF ASSESSMENT PROCE EDINGS, THE ASSESSEE RAISED OBJECTIONS TO PROCEEDINGS INITIATE D U/S 148 OF THE ACT, PLACING RELIANCE ON THE DECISION OF HONBLE PUNJAB & HARYA NA HIGH COURT IN THE CASE OF VIDYA SAGAR VS. CIT, 277 ITR 120. THE AO REJECTED T HE OBJECTIONS FOLLOWING THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CROVER NURSING HOME VS. ITO, 248 ITR 493 (P & H) AND THE FACT THAT THE DECISION IN VIDYA SAGAR (SUPRA)RELATED TO THE PERIOD PRIOR TO AMENDMENT OF SECTION 147 OF THE ACT W.E.F. 1.4.89. THOUGH THE ASSESSEE RELIED UPON A DECISION OF HONBLE SUPREME COURT IN ACIT VS. DHARIYA CONSTRUCTION CO. ,328 ITR 515(SC), THE AO DECLINED TO FOLLOW THE SAID JUDGMENT ON THE GROUND THAT THE SAME PERTAINE D TO A PERIOD PRIOR TO AMENDMENT OF SECTION 147 OF THE ACT. EVEN THOUGH T HE ASSESSEE SUBMITTED A WRITTEN REPLY WHILE RELYING UPON THE DECISION IN THE CASE O F CIT VS. SURESH KUMAR L/H SIRI RAM, 272 ITR 254 AND ABDUL MAJID VS. ITO & ORS, 17 8 ITR 616, THE AO COMPLETED THE ASSESSMENT. U/S 144 OF THE ACT WITH THE ADDITIO N OF ` ` 16,94,975/-(34,32,123- 17,37,148) ON ACCOUNT OF DIFFERENCE IN THE COST OF CONSTRUCTION OF RICE SHELLER BUILDING ESTIMATED BY THE DVO AND SHOWN BY THE ASSESSEE. 3. ON APPEAL, THE ASSESSEE QUESTIONED THE VA LIDITY OF REOPENING OF THE ASSESSMENT IN THE LIGHT OF DECISION OF HONBLE SUPR EME COURT IN THE CASE OF ACIT VS. DHARIYA CONSTRUCTION CO.,328 ITR 515(SC); INDIAN & EASTERN NEWSPAPER SOCIETY VS. CIT, 119 ITR 996 (SC); VIDYA SAGAR VS. CIT,277 ITR 120 (P & H), CIT VS. INDIAN OVERSEAS BANK LTD.,252 ITR 640 (MAD.)AND SATNAM OVE RSEAS LTD. AND ORS VS. ADDL. CIT, 329 ITR 237 (DELHI.). IN THE LIGHT OF THESE DE CISIONS AND WRITTEN SUBMISSIONS ITA NO. 4310/DEL/11 3 FILED BY THE ASSESSEE, THE LD. CIT (A) CANCELLED TH E REASSESSMENT PROCEEDINGS IN THE FOLLOWING TERMS : 1.04 THE ISSUE IS CONSIDERED. THE FACTS, AS DISC USSED ABOVE, ARE THAT THE ASSESSMENT IN THIS CASE FOR THE ASSESSMENT YEAR 2005-06 WAS COMPLETED U/S 143(3) OF THE ACT. DURING THE ASSESSM ENT PROCEEDING FOR THE ASSESSMENT YEAR 2006-07, THE AO REFERRED THE MA TTER OF COST OF CONSTRUCTION TO THE V.O, I.T. DEPARTMENT TO ASCERTA IN THE ACTUAL COST OF INVESTMENT MADE IN THE BUILDING BY THE APPELLANT. A S PER THE REPORT OF THE VO, THE INVESTMENT IN THE CONSTRUCTION OF BUILD ING IN THE YEAR UNDER CONSIDERATION WAS DETERMINED AT RS.34,32,123/- AS AGAINST RS.17,37,148/- DECLARED BY THE APPELLANT AND THE DI FFERENCE OF RS. 16,94,975/- WAS TAKEN AS UNEXPLAINED INVESTMENT IN THE CONSTRUCTION OF BUILDING BY THE A.O. TO BRING TO TAX THIS UNEXPLAIN ED INVESTMENT, THE AO INITIATED PROCEEDING U/S 147 AND ISSUED NOTICE U /S 148 OF THE ACT, WHICH IS CHALLENGED BY THE APPELLANT VIDE GROUNDS O F APPEAL NO. 1. 1.05 IN THE WRITTEN SUBMISSIONS FILED BY THE APPE LLANT DURING THE APPEAL PROCEEDINGS, THE APPELLANT SUBMITTED THAT PR OCEEDINGS U/S 147 OF THE ACT CANNOT BE INITIATED ON THE BASIS OF THE VALUATION REPORT OF THE V.O. AND IN SUPPORT, THE APPELLANT RELIED ON THE FO LLOWING DECISIONS :- 1. CIT V/S DHARIYA CONSTRUCTION CO. (2010) 328 ITR 515 (SC) 2. VIDYA SAGAR V/S CIT (2005) 277 ITR 120 (P & H) 1.06 THE ORDER OF THE SUPREME COURT IS REFERRED TO READS AS UNDER: 1. HAVING EXAMINED THE RECORD, WE FIND THAT IN THIS C ASE, THE DEPARTMENT SOUGHT REOPENING OF THE ASSESSMENT BASED ON THE OPI NION GIVEN BY THE DISTRICT VALUATION OFFICER (DVO). THE OPINION OF THE DVO PER SE IS NOT AN INFORMATION FOR THE PURPOSES OF REOPENING ASSESSMENT UNDER SECT ION 147 OF THE INCOME- TAX ACT, 1961. THE ASSESSING OFFICER HAS TO APPLY H IS MIND TO THE INFORMATION, IF ANY, COLLECTED AND MUST FORM A BELIEF THEREON. I N THE CIRCUMSTANCES, THERE IS NO MERIT IN THE CIVIL APPEAL. THE DEPARTMENT WAS NO T ENTITLED TO REOPEN THE ASSESSMENT . 1 .07 IN THE CASE OF PUNJAB & HARYANA HIGH COURT, RE LIED UPON BY THE APPELLANT, THE COURT HELD AS UNDER: ASSESSEE HAVING DISCLOSED COST OF CONSTRUCTION AND THE AO HAVING ACCEPTED THE SAME IN ORIGINAL ASSESSMENT,REOPENING OF ASSESS MENT ON THE BASIS OF SUBSEQUENT REPORT OF DVO SHOWING COST OF CONSTRUCTI ON ON THE HIGHER SIDE WAS INVALID. ITA NO. 4310/DEL/11 4 2.00 IN VIEW OF THE FACTUAL AND LEGAL POSITION DIS CUSSED ABOVE, PROCEEDINGS U/S 147 OF THE ACT INITIATE BY THE AO IS HELD NOT AS PER LA W AND HENCE JURISDICTION ASSUMED BY THE AO PER ISSUE OF NOTICE U/S 148 OF THE ACT IS AL SO HELD NVALID. ACCORDINGLY, THE ASSESSMENT MADE BY THE AO IS NOT AS PER LAW AND HEN CE IS QUASHED. SINCE THE ASSESSMENT IS QUASHED, THE OTHER GROUNDS OF APPEAL HAS BECOME INFRUCTUOUS. 4.. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LD. DR SUPPORTED THE ORDER OF AO I N THE LIGHT OF DECISION OF THE HONBLE KARNATAKA HIGH COURT IN K.G. KEMPTUR V. SECOND WEALTH-TAX OFFICER,146 ITR 611 WHILE NONE APPEARED ON BEHALF OF THE ASSESSEE. 5. WE HAVE HEARD THE LD. DR AND GONE THROUGH THE FA CTS OF THE CASE AS ALSO THE AFORESAID DECISION REPLIED UPON THE LD. DR. INDISPU TABLY, THE ASSESSMENT HAS BEEN REOPENED ONLY ON THE BASIS OF ESTIMATE OF COST OF C ONSTRUCTION OF RICE SHELLER BUILDING IN THE DVOS REPORT SUBSEQUENT TO COMPLETION OF AS SESSMENT U/S 143 (3) OF THE ACT ON 24 TH DECEMBER, 2007.HONBLE APEX COURT IN DHARIYA CONST RUCTION CO.(SUPRA) HELD THAT THE OPINION OF THE DVO PER SE IS NOT AN INFORM ATION FOR THE PURPOSES OF REOPENING ASSESSMENT UNDER SECTION 147 OF THE INCOM E-TAX ACT, 1961.HONBLE JURISDICTIONAL HIGH COURT IN VIDYA SAGAR(SUPRA) HEL D THAT REOPENING OF ASSESSMENT ON THE BASIS OF SUBSEQUENT REPORT OF DVO SHOWING COST OF CONSTRUCTION ON THE HIGHER SIDE WAS INVALID. IN SMT. TARAWATI DEBI AGARWAL V. ITO [1986] 162 ITR 606, A LEARNED SINGLE JUDGE OF THE HONBLE CALCUTTA HIGH COURT QUASHED THE NOTICE UNDER SECTION 147( A ) OF THE ACT WHILE OBSERVING THAT VALUATION WAS AL WAYS A QUESTION OF OPINION AND UNLESS THERE WAS A CLEAR FINDING ON THE BASIS OF THE MATERIAL THAT THE ASSESSEE HAD INVESTED IN THE CONSTRUCTION MORE THAN WHAT HAD BEEN SHOWN BY HER IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE INCOME-TA X OFFICER COULD NOT PROCEED MERELY ON THE BASIS OF THE VALUATION REPORT OF THE DEPARTMENTAL VALUER. A SIMILAR VIEW WAS TAKEN IN ABDUL MAJID V. ITO [1989] 178 ITR 616 [MP]; SARDAR KEHAR SINGH V. CIT [1992] 195 ITR 769[RAJASTHAN]; CIT V. SMT. USHA MAT HUR [2001] 252 ITR 179 (PUNJ. & HAR.);SMT. AMALA DAS V. CIT [1984] 146 ITR 216 (P UNJ. & HAR.); AND SURESH KUMAR L/H SIRI RAM(SUPRA)., CIT VS V.T. RAJENDRAN ( 2007) , 288 ITR 312 (MAD), CIT VS K. RAJAPANDIAN (2009) 311 ITR 477 (MAD ) ITA NO. 4310/DEL/11 5 5.1 IN K.G. KEMPTUR(SUPRA) RELIED UPON BY THE LD . DR, IT WAS OBSERVED THAT A VALUATION MADE BY A VALUATION OFFICER UNDER SECTION 16A OF THE WEALTH TAX ACT,1957 WAS BINDING ON THE WTO UNLIKE A VALUATION MADE BY A REGISTERED VALUER AND THE WTO WAS BOUND TO COMPLETE THE ASSESSMENT IN CONFORM ITY WITH THE VALUATION OF THE VALUATION OFFICER. HONBLE HIGH COURT HELD THAT A R EPORT OF A VALUATION OFFICER MADE UNDER SECTION 16A, THOUGH IT CONTAINED THE OPINION OF THAT OFFICER, CANNOT BE CHARACTERISED AS A MERE OPINION OF THAT OFFICER AND ON ANY PRINCIPLE, IT IS NOT POSSIBLE TO HOLD THAT THE REPORT OF THE VALUATION OFFICER IS NOT INFORMATION AS TO A FACT. ACCORDINGLY, HONBLE HIGH COURT HELD THAT THE NOTIC ES ISSUED BY THE WTO FOR REOPENING THE ASSESSMENTS ON THE BASIS OF THE REPOR T OF THE VALUATION OFFICER DID NOT SUFFER FROM ANY ERROR OF JURISDICTION OR MANIFEST E RROR OF LAW. HOWEVER, THIS VIEW OF THE HONBLE KARNATAKA HIGH COURT IS NO LONGER VALID IN VIEW DECISION OF THE HONBLE APEX COURT IN DHARIYA CONSTRUCTION CO.(SUPRA).THUS, REL IANCE PLACED BY THE LD. DR ON THE DECISION OF HONBLE KARNATAKA HIGH COURT IS MISPLAC ED 6. IN THE LIGHT OF VIEW TAKEN BY THE HONBLE APE X COURT IN DHARIYA CONSTRUCTION CO.(SUPRA) AND BY THE HONBLE JURISDICTIONAL HIGH COURT IN THEIR AFORECITED DECISIONS, WE HAVE NO ALTERNATIVE BUT TO UPHOLD THE FINDINGS O F THE LD. CIT(A). THEREFORE, GROUND NO.1 IN THE APPEAL IS DISMISSED. 7. NO ADDITIONAL GROUND HAVING BEEN RAISED BEF ORE US IN TERMS OF RESIDUARY GROUND NO.2 IN THE APPEAL, ACCORDINGLY, THIS GROUN D IS DISMISSED. 8. NO OTHER PLEA OR ARGUMENT WAS MADE BEFORE U S. 9. IN THE RESULT, APPEAL IS DISMISSED. SD/- SD/- (RAJPAL YADAV) (A.N. PAHUJA) JUDICIAL MEMBER ACCOUNTANT MEMBE R VEENA ITA NO. 4310/DEL/11 6 COPY OF THE ORDER FORWARDED TO : - 1 SHRI GURU RAM DASS RICE CO.,KAITHAL ROAD, KARNAL 2. ITO WARD-4,KARNAL 3. CIT,CONCERNED 4. CIT (APPEALS)- KARNAL 5. DR, ITAT, G BENCH,NEW DELHI. TRUE COPY. BY ORDER. ASSISTANT REGISTRAR, ITAT.