ACIT, Meerut V. M/s. Rohtas Projects Ltd., Lucknow

ITA 4358/DEL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96908 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 01-07-2015
• Assessment Year: 1996-1997
• Appeal Filed On: 17-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKRAM SAHAY
• Assessee Lawyers: VINOD K BINDAL; SANJEEV BINDAL CAS
• Keywords: Rejection of books of accounts; Unexplained investment; Valuation report; Reassessment proceedings
• Section: 147; 131; 69; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : F NEW DELHI BEFORE SHRI J.SUDHAKAR REDDY, A CCOUNTANT MEMBER AND SHRI C.M. GARG , JUDICIAL MEMBER ITA NO: 4358 , 4359, 4360, 4361 & 4362 /DEL/20 13 A.Y.: 1996 - 97 , 1997 - 98, 1998 - 99, 1999 - 2000, AND 2001 - 02 ACIT, CENTRAL CIRCLE VS. ROHTAS PROJECTS LTD. AAYAKAR BHAWAN 67, HALWASIYA MARKET, HAZRAT GANJ BHAINSALI GROUND, MEERUT LUCKNOW PAN: AACCR 7598 H (APPELLANT) (RESPONDENT) A SSESSEE BY : SH.VI NOD K BINDAL & SH.SANJEEV BINDAL, CAS REVENUE BY : SH. VIKRAM SAHAY, SR.D.R. O R D E R PER J.SUDHAKAR REDDY, ACCOUNTANT MEMBER ALL THESE APPEALS A R E FILED BY THE REVENUE AND ARE DIRECTED AGAINST THE COMMON ORDER OF LD.CIT(A) , MEERUT DATED 20.03.2013 PERTAINING TO THE A.YS 1996 - 97, 1997 - 98, 1998 - 99, 1999 - 2000, AND 2001 - 2002. AS THE ISSUE THAT ARISE IN ALL THESE APPEALS IS COMMON, FOR THE SAKE OF CONVENIEN CE, THESE APPEALS ARE HEARD TOGETHER AND ARE DISPOSED OF BY WAY OF THIS COMMON ORDER. 2. THE FACTS OF THE CASE ARE BROUGHT OUT BY THE FIRST APPELLATE AUTHORITY AT PARA 2 AND PARA 3.1 WHICH IS EXTRACTED FOR READY REFERENCE. 2. THE ASSESSEE COMPANY IS PA RT OF ROHTAS GROUP AND IS ENGAGED IN THE BUSINESS OF CONSTRUCTION, DEVELOPMENT AND SALE OF RESIDENTIAL AS WELL AS COMMERCIAL BUILDINGS/COMPLEXES AND FLATS. THE ASSESSEE COMPANY IS THE ITA NOS. 4358 - 4359 - 4360 - 4361 & 4362/DEL/13 A.YS. 1996 - 97, 1997 - 98, 1998 - 99, 1999 - 2000, & 2001 - 02 ROHTAS PROJECTS LTD., LUCKNOW 2 FLAGSHIP COMPANY OF THE GROUP. DURING THE ASSESSMENT PROCEEDINGS FOR A.Y . 1995 - 96, THE AO HAD MADE A REFERENCE TO THE DISTRICT VALUATION OFFICER ( DVO) IN RESPECT OF INVESTMENT MADE IN K HURRAM NAGAR PROJECT. THE REPORT DATED 28.10.1997 FURNISHED BY THE DVO COVERED THREE ASSESSMENT YEARS I.E A.Y. 1995 - 96, 1996 - 97 AND 1997 - 98. O N THE BASIS OF THIS REPORT, PROCEEDINGS UNDER SECTION 148 WERE INITIATED FOR THE ASSESSMENT YEARS 1996 - 97 AND 1997 - 98. IN THE ASSESSMENT ORDER PASSED FOR THESE TWO YEARS ON 26.03.2002, APART FROM OTHER ADDITIONS, ADDITIONS OF RS 44,25,800 & RS 58,63,126 WE RE MADE TO THE TOTAL INCOME ON ACCOUNT OF UNDERINVESTMENT COMPUTED WITH REFERENCE TO THE REPORT OF THE DVO. THE ASSESSMENT FRAMED FOR A.Y. 1995 - 96 WAS CONTESTED IN APPEAL. THE CIT ( A) - III, LUCKNOW BY HIS ORDER D T. 15.10.99 DELETED THE ADDITION MADE ON ACC OUNT OF UNDERINVESTMENT BASED ON THE REPORT OF THE DVO. IN THIS ORDER, IT WAS OBSERVED THAT WHERE AN ASSESSEE HAD MAINTAINED PROPER BOOKS OF ACCOUNTS AND ALL DETAILS WERE MENTIONED IN SUCH BOOKS OF ACCOUNTS, WHICH WERE ALSO DULY SUPPORTED BY VOUCHERS AND N O DEFECTS ARE POINTED OUT, THE FIGURES SHOWN THEREIN HAVE TO BE FOLLOWED. A VALUATION REPORT CAN ONLY BE TAKEN INTO CONSIDERATION WHEN THE BOOKS OF ACCOUNTS ARE NOT RELIABLE OR ARE NOT SUPPORTED BY PROPER VOUCHERS OR THE AO IS OF THE OPINION THAT NO RELIAN CE CAN BE PLACED ON SUCH BOOKS OF ACCOUNTS . IT WAS HELD THAT THE AO WAS NOT JUSTIFIED IN SEEKING THE ASSISTANCE OF THE DVO EVEN WHEN NO DEFECTS WERE POINTED OUT IN THE AUDITED BOOKS OF ACCOUNTS OF THE ASSESSEE. THEREAFTER, IT HAS BEEN ALSO HELD THAT EVEN ON MERITS, THE ESTIMATES OF THE DVO ABOUT THE INVESTMENT IN CONSTRUCTION OF COMPLEX WERE NOT SUSTAINABLE AS THE SAID REPORT CONTAINED VARIOUS INFIRMITIES. RELYING ON THE SAID DECISION, THE ADDITIONS MADE ON IDENTICAL GROUNDS IN A.Y. 1996 - 97 AND 1997 - 98 WE RE ALSO DELETED BY THE COMBINED APPEAL ORDER DATED 31.12.2002 BY THE CIT(A) - III , LUCKNOW. THE SECOND APPEAL FILED BY THE DEPARTMENT BEFORE THE ITAT, B BENCH, LUCKNOW AGAINST THE AFORESAID ORDERS OF THE CIT ( A) WERE DISMISSED AND THE ORDERS OF THE FIRST APPE LLATE AUTHORITY WERE CONFIRMED BY THE ORDER DATED 14.07.2010. MEANWHILE, SCRUTINY PROCEEDINGS HAD BEEN CONDUCTED FOR A.Y. 1998 - 1999 AND DURING THE COURSE OF SUCH PROCEEDINGS, ON 07.02.2001, THE A O MADE A REFERENCE TO THE DV O UNDER SECTION 131 (1) (D) OF THE ACT FOR THE VALUATION OF TWO PROJECTS BEING EXECUTED BY THE ASSESSEE COMPANY NAMELY GOLF LINK APARTMENTS AND ROHTAS CORONATION FARMS. APPARENTLY BECAUSE THE SAID REPORT HAD NOT BEEN RECEIVED BY THE DATE OF LIMITATION FOR THE COMPLETION OF THE ASSESSMEN T PROCEEDINGS FOR A.Y. 1998 - 99, THE ORDER PASSED UNDER SECTION 143 (3) FOR THAT YEAR DID NOT HAVE ANY DISCUSSION REGARDING THIS REFERENCE MADE TO THE DV O . THE ASSESSMENT ORDER FOR A.Y 1999 - 2000 WAS PASSED UNDER SECTION 143 (3) ON 28.03.2002 AND EVEN IN THIS ORDER, THERE WAS NO DISCUSSION REGARDING ANY REFERENCE MADE TO THE DV O . SCRUTINY PROCEEDINGS WERE BEING CONDUCTED FOR A. Y. 2000 - 01 AND IT WAS DURING THE COURSE OF THESE PROCEEDINGS THAT THE REPORT OF THE DVO DATED 26.03.2002 IN RESPECT OF THE REFEREN CE MADE FOR THE VALUATION OF GOLF LINK ITA NOS. 4358 - 4359 - 4360 - 4361 & 4362/DEL/13 A.YS. 1996 - 97, 1997 - 98, 1998 - 99, 1999 - 2000, & 2001 - 02 ROHTAS PROJECTS LTD., LUCKNOW 3 APARTMENTS AND ROHTAS CORONATION FARMS (DURING THE PROCEEDINGS FOR A.Y. 1998 - 99) WAS RECEIVED. THE DV O REPORT INDICATED VARIATION IN THE INVESTMENTS DECLARED BY THE ASSESSEE COMPANY AND ESTIMATED BY THE DV O FO R SIX AS SESSMENT YEARS (1996 - 97, 1997 - 98, 1998 - 99, 1999 - 2000, AND 2001 - 02). AS THE PROCEEDINGS FOR A.Y. 2000 - 2001 WERE IN PROGRESS AT THE TIME WHEN THE REPORT WAS RECEIVED, AN ADDITION OF RS 30,55,436 WAS MADE IN THE ASSESSMENT ORDER FOR THAT YEAR PASSED ON 27.03.2003 ON ACCOUNT OF THE D IFFERENCE BETWEEN THE COSTS DECLARED BY THE ASSESSEE AND ESTIMATED BY THE DV O . THIS ADDITION WAS CONTESTED IN APPEAL. THE CIT(A) III, LUCKNOW BY THE ORDER DATED 26.03.2004 DELETED THE ADDITION MADE ON ACCOUNT OF UNDERINVESTMENT. THE CIT (A) NOTED THE CONTE NTION MADE ON BEH ALF OF THE ASSESSEE COMPANY THAT THE REPORT OF THE DVO WAS SILENT AS TO WHY A PARTICULAR RATE HAD BEEN ADOPTED FOR THE PURPOSES OF VALUATION, ITS BASIS AND RATIONALE AS ALSO THE RELIANCE PLACED ON THE DECISION OF THE HONOURABLE SUPREME CO URT IN THE CASE OF AMIA BALA PAUL (262 ITR 407). THE ITAT, B BENCH, LUCKNOW BY ITS ORDER DATED 09.08.2005 HELD THAT THE ISSUE WAS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION IN THE CASE OF AMIA BALA PAUL WHEREIN IT HAD BEEN HELD THAT IN ALL ASSESSMEN T OF THE ASSESSEE, THE A O CANNOT REFER TO TH E VALUATION OFFICER THE QUESTION OF COST OF CONSTRUCTION OF HOUSE PROPERTY BUILT BY THE ASSESSEE. IT WAS ALSO OBSERVED THAT THE POWER OF THE A O UNDER SECTION 131 (1) AND 133 (B) IS DISTINCT FROM AND DOES NOT INC LUDE THE POWER TO REFER A MATTER TO THE VALUATION OFFICER UNDER SECTION 55A. MEANWHILE, NOTICES AND 2001 - 2002. THE ASSESSEE FILED WRIT PETITIONS BEFORE THE HONOURABLE ALLAHABAD HIGH COURT CHALLENGING THE ISSUE OF THE NOTICES UNDER SECTION 148 FOR THESE YE ARS. THE HONOURABLE COURT STAYED THE PROCEEDINGS. SUBSEQUENTLY, THE HONOURABLE COURT IN ITS ORDER DATED 29.07.2010 HELD THAT THE AO SHOULD PASS A SPEAKING AND A REASONED ORDER FOR THESE YEARS. THE PRESENT APPEALS ARE CONTESTING THE ASSESSMENT FRAMED IN CON SEQUENCE OF THE NOTICES ISSUED UNDER SECTION 148 FOR THESE YEARS. 3.1 THE ASSESSMENTS FRAMED FOR A.Y. 1996 - 97 AND 1997 - 98 STAND ON EQUAL FOOTING INASMUCH AS IN BOTH THESE YEARS, REASSESSMENT PROCEEDINGS HAD ONCE BEEN CONDUCTED ON THE GROUND OF UNDERINVES TMENT IN KHURRAMNAGAR PROJECT AND ADDITIONS HAD BEEN MADE IN THE ORDERS PASSED UNDER SECTION 148/143 (3), WHICH WERE SUBSEQUENTLY DELETED IN APPEAL. THE PRESENT APPEALS RELATE TO THE SECOND ROUND OF REASSESSMENT PROCEEDINGS INITIATED ON THE BASIS OF THE RE PORT OF THE OVO FOR GOLF LINK APARTMENTS PROJECT AND ROHTAS CORONATION FARMS PROJECT. THE GROUNDS OF APPEAL FOR BOTH THESE YEARS ARE IDENTICAL. 3. THE FIRST APPELLATE AUTHORITY GRANTED RELIEF TO THE ASSESSEE. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE U S ON THE FOLLOWING GROUNDS. ITA NOS. 4358 - 4359 - 4360 - 4361 & 4362/DEL/13 A.YS. 1996 - 97, 1997 - 98, 1998 - 99, 1999 - 2000, & 2001 - 02 ROHTAS PROJECTS LTD., LUCKNOW 4 1. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION U/S 69 FOR UNEXPLAINED INVESTMENT BY HOLDING THAT THE NEED TO REVISE THE ESTIMATE OF THE D VO ON ACCOUNT OF THE DEFICIENCIES POINTED OUT BY THE ASSESSEE DO NOT EXIST WITHOUT LOOKING INTO THE MERITS AND DISCUSSION MADE BY AO IN THE ASSESSMENT ORDER AND FINDINGS GIVEN THEREIN. 2. THAT THE LD. CIT(A) IS NOT JUSTIFIED IN ALLOWING THE APPEAL OF THE ASSESSEE WITHOUT APPRECIATING THE FACT THAT THE ASSESSING OFFICER HAD UNDERTAKEN THE VALID AND LAWFUL PROCEEDINGS UNDER SECTION 147 OF LT. ACT AND NOTICES U/S 148 WERE ISSUED ON THE BASIS OF NEW INFORMATION BEING D VO REPORT AND THAT THE ASSESSEE HAD NOT DI SCLOSED FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR PURPOSE OF ASSESSMENT/REASSESSMENT PROCEEDINGS. 3. THAT THE LD. CITIA) HAS ERRED IN APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CASE THAT THE AO MADE REFERENCE U/S 142A TO D VO MUCH BEFORE THE JU DGMENT OF HON' BLE SUPREME COURT PASSED ON 19/10/2009 IN CASE OF SARGAM CINEMA IN (2011) 197 TAXMAN 203(SC). 4. THAT THE LD. CITIA) HAS ERRED IN IGNORING THE RELIANCE MADE BY THE AO IN THE CASE OF PHOOL CHAND PRAJRANG LAL VS ITO (1993)203 ITR 456 OF HON'B LE SUPREME COURT WHEREIN IT HAS HELD THAT WHERE THE AO COMES INTO POSSESSION OF FRESH INFORMATION OR NEW FACTS WHICH LEAD HIM TO FORM A REASONABLE BELIEF THAT THE INCOME HAS ESCAPED ASSESSMENT, THE AO CAN REOPEN THE ASSESSMENT. 5. THAT THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN ALLOWING THE APPEAL OF THE ASSESSEE ON THE GROUNDS THAT THE ASSESSMENT ORDER IS BARRED BY LIMITATION WHEREAS THE ASSESSMENT HAS BEEN COMPLETED BY THE AO WITHIN THE TIME PERIOD AVAILABLE WITH THE AO IN TERMS OF FIRST PROVISO TO THE EXPLANATION - 1 OF SECTION 153 OF THE INCOME TAX ACT, 1961. 6. THAT THE ORDER OF THE LD. CIT ( A) BEING ERRONEOUS IN LAW AND ON FACTS WHICH NEEDS TO BE VACATED AND THE ORDER OF THE A.O. BE RESTORED. 7. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY ONE OR MORE OF THE GROUND OF THE APPEAL AS STATED ABOVE AS AND WH EN NEED FOR DOING SO MAY ARISE. 4 . HEARD SH.VIKRAM SAHAY, SR.D.R. ON BEHALF OF THE REVENUE AND SHRI VIMAL K BINDAL, THE LD.COUNSEL FOR THE ASSESSEE. 5 . ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, PERUSAL OF PAPERS ON RECORD AS WELL AS CASE LAWS CITED, WE HOLD AS FOLLOWS. 6. THE SOLE ISSUE THAT ARISES FOR OUR ADJUDICATION IS WHETHER THE FIRST APPELLATE AUTHORITY WAS RIGHT IN HOLDING THAT, WHERE THE A.O. HAS NOT ITA NOS. 4358 - 4359 - 4360 - 4361 & 4362/DEL/13 A.YS. 1996 - 97, 1997 - 98, 1998 - 99, 1999 - 2000, & 2001 - 02 ROHTAS PROJECTS LTD., LUCKNOW 5 REJECTED THE BOOKS OF ACCOUNTS AND HAS MADE A REFERENCE TO THE DEPARTMENTAL VALUATION OFFICER ( D.V.O. ) , RELIANCE COULD NOT BE PLACED ON THE REPORT OF THE D.V.O. AS THE REFERENCE IS BAD IN LAW . THIS ISSUE IS ADMITTEDLY COVERED BY THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF SA R GAM CINEMA VS. CIT (2010) REPORTED IN 328 ITR 513 (S.C.) , WHEREIN IT IS HELD AS FOLLOWS. HELD, THAT THE ASSESSING AUTHORITY COULD NOT REFER THE MATTER TO THE DEPARTMENTAL VALUATION OFFICER IN A CASE WHERE THERE WAS A CATEG ORICAL FINDING RECORDED BY THE TRIBUNAL THAT THE BOOKS OF ACCOUNTS WERE NEVER REJECTED. DECISION OF THE UTTARANCHAL HIGH COURT REVERSED. 6.1. LD.D.R. SUBMITTED THAT THE REVENUE HAS STRONG OBJECTIONS TO THE FINDINGS OF THE FIRST APPELLATE AUTHORITY THAT (I) THE A.O. HAS NOT RECORDED SATISFACTION PRIOR TO MAKING A REFERENCE TO THE DVO U/S 142A OF THE ACT; (II) THAT THE RATES APPLIED BY THE DVO W AS CPWD RATES WHICH ARE ABOUT 15% HIGHER THAN THE UP PWD RATES AND (III) THAT THERE IS A CHANGE IN OPINION WHILE RECORDING REASONS FOR REOPENING. WE DO NOT SEE ANY REASON TO EXPRESS OUR OPINION ON THESE OBJECTIONS, AS THE ADDITION IN QUESTION CANNOT BE S USTAINED. 6.2. T HE ISSUE IS ADMITTEDLY COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF HON BLE SUPREME COURT FOR THE REASON THAT, IT IS AN ADMITTED FACT THAT THE A.O. HAS NOT FOUND ANY DEFECTS IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE, NOR HAS HE REJECTED THE SAME . WHEN THE UNDISPUTED FACT IS THAT THE ASSESSING OFFICER HAS NOT REJECTED THE BOOKS OF ITA NOS. 4358 - 4359 - 4360 - 4361 & 4362/DEL/13 A.YS. 1996 - 97, 1997 - 98, 1998 - 99, 1999 - 2000, & 2001 - 02 ROHTAS PROJECTS LTD., LUCKNOW 6 ACCOUNTS, THE REFERENCE TO THE D.V.O. IS BAD IN LAW AND CONSEQUENTLY NO RELIANCE CAN BE PLACED ON THE REPORT OF THE D.V.O. THUS W E DO NOT SEE ANY REASON TO INTERFERE IN THE ORDER OF THE LD.CIT(A) OR TO ADJUDICATE ON THE ISSUES RAISED BY THE LD.D.R. 7. IN THE RESULT THE APPEALS FILED BY THE REVENUE FOR ALL THE ASSESSMENT YEARS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 05 TH AUGUST , 2015 . SD/ - SD/ - ( C.M. GARG ) (J.SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: THE 05 TH AUGUST, 2015 *MANGA COPY OF THE ORDER FORWARDED TO: 1. APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT(A); 5.DR; 6.GUARD FILE BY ORDER ASST. REGISTRAR