ITO 12(3)4, MUMBAI V. URMILA CONSTRUCITON COMPANY, MUMBAI

ITA 4634/MUM/2013

• Counselvise Citation: 463419914 RSA 2013
• Duration Of Justice: 2 year(s) 3 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2005-2006
• Appeal Filed On: 13-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ADAGIRI DR
• Assessee Lawyers: VIJAY C KOTHARI
• Keywords: Reopening of assessment; Value adopted by valuation officer; Difference of opinion; Valuation report; Reason to believe; Change of opinion
• Section: 143(3); 147; 69; 148; 154

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ITA NO.4634/MUM/2013 ASSESSMENT YEAR: 2005-06 ITO-12(3)(4), ROOM NO.123, 1 ST FLOOR, AAYAKAR BHAVAN, M.K.ROAD MUMBAI-400020 / VS. M/S URMILA CONSTRUCTION COMPANY, 422, NAGINDAS MASTER ROAD, MUMBAI-400023 ( / REVENUE) ( !' # /ASSESSEE) PAN. NO. AAAFU0226C / REVENUE BY SHRI B.YADAGIRI -DR !' # / ASSESSEE BY SHRI VIJAY C. KOTHARI $ % & # ' / DATE OF HEARING : 22/09/2015 & # ' / DATE OF ORDER: 30/10/2015 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DAT ED 04/03/2013 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI. THE ONLY GROUND RAISED IN THIS APPEAL PERTAINS TO H OLDING THAT REOPENING U/S 147 OF THE INCOME TAX ACT, 1961(HEREI NAFTER THE ACT) IS INVALID BY APPLYING THE RATIO LAID DOWN BY HONBLE APEX COURT IN THE CASE OF DHARIYA CONSTRUCTION COMP ANY. URMILA CONSTRUCTION COMPANY ITA NO.4634/MUM/2013 2 2. DURING HEARING OF THIS APPEAL, WE HAVE HEARD, S HRI B. YADAGIRI, LD. DR, AND SHRI VIJAY C. KOTHARI, LD. COUNSEL FOR THE ASSESSEE. THE CRUX OF ARGUMENTS ON BEHALF OF TH E REVENUE IS THAT THE ASSESSEE DID NOT MAINTAIN PROPERLY THE CLOSING STOCK AND THE REPORT OF THE DVO COULD NOT RECEIVED BY THE ASSESSING OFFICER AND FURTHER THE ASSESSEE ALSO DID NOT CO- OPERATE WITH THE DEPARTMENT, THEREFORE, ADDITION WA S RIGHTLY MADE U/S 69 OF THE ACT AS HUGE DIFFERENCE WAS FOUND . OUR ATTENTION WAS ALSO INVITED TO NOTE MENTIONED IN THE ORIGINAL ASSESSMENT ORDER DATED 31/12/2007. IT WAS CONTEND ED THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS), THERE FORE, IS NOT JUSTIFIED IN ITS DECISION. 2.1. ON THE OTHER HAND, THE LD. COUNSEL FOR THE AS SESSEE PLACE RELIANCE UPON THE DECISION IN 328 ITR 515 (SC ) BY CONTENDING THAT IN ORIGINAL ASSESSMENT ORDER, THE ASSESSING OFFICER HAS MADE REFERENCE TO THE DVO AND THE REPOR T FROM THE DVO WAS NOT RECEIVED, THEREFORE, IT WAS CONTEND ED WHETHER SECTION 147 OF THE ACT IS A CORRECT PROVISI ON WHICH CAN BE INVOKED. IT WAS ASSERTED THAT THE ASSESSING OFFICER HAS ALREADY FORMED A BELIEF THAT VALUE SHOWN BY THE ASS ESSEE IS NOT CORRECT, THEREFORE, HE SENT FOR VALUATION TO TH E DVO. PLEA WAS ALSO RAISED THAT THE DEPARTMENT WOULD HAVE DONE U/S 154 OF THE ACT OR UNDER ANY OTHER PROVISIONS BUT NO T U/S 147 OF THE ACT. THE LD. COUNSEL EXPLAINED THAT INCOME ESCAPING ASSESSMENT IS ALREADY WITH THE ASSESSING OFFICER AN D HE FRAMED ASSESSMENT BY FORMING A BELIEF, THUS, IT WAS NOT A VALID REFERENCE. IN REPLY, THE LD. DR CONTENDED THA T THE ASSESSING OFFICER USED INFORMATION AND THEN FORMED A BELIEF URMILA CONSTRUCTION COMPANY ITA NO.4634/MUM/2013 3 BY OBTAINING APPROVAL FROM JCIT, BY PLACING RELIANC E UPON THE DECISION IN RAJESH JHAVERI. THE LD. COUNSEL FO R THE ASSESSEE CONTENDED THAT IN THE CASE OF RAJESH JHAVE RI, THE FACTS ARE DIFFERENT AS IN THE CASE OF ASSESSEE, ASS ESSMENT WAS FRAMED U/S 143(3) OF THE ACT. 2.2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, ARE THAT THE ASSESSEE IS IN THE BUSINESS AS A BUILD ER AND DEVELOPERS DECLARED NIL INCOME IN ITS RETURN FILED ON 29 TH OCTOBER, 2005. THE CASE OF THE ASSESSEE WAS SELECTE D FOR SCRUTINY. DURING THE COURSE OF ASSESSMENT PROCEEDI NG IT WAS NOTED BY THE ASSESSING OFFICER THAT THE ASSESSEE HA S VALUED WORK IN PROGRESS (HEREINAFTER FOR SHORT AS WIP) AT THE END OF THE YEAR AT RS.2,28,44,779/-. THE ASSESSEE INFORMED THE ASSESSING OFFICER THAT DUE TO CERTAIN DISPUTES BETW EEN THE VENDORS OF TDR AND THE ASSESSEE, THE PROJECT IS HAL TED FOR ALMOST TEN YEARS, THEREFORE, NO ACTIVITY COULD BE C ARRIED OUT AT THE SITE. IT IS NOTED THAT IN THE ORIGINAL ASSESSM ENT, COMPLETED U/S 143(3) OF THE ACT (DATED 31/12/2007) THE ASSESSING OFFICER NOTICED CERTAIN DEFECTS WHICH ARE ENUMERATED AS UNDER:- I. NON MAINTENANCE OR IMPROPER MAINTENANCE OF RECORDS RELATED TO AMENITIES. II. NON MAINTENANCE OR IMPROPER MAINTENANCE OF RECORDS RELATED TO LABOUR PAYMENTS. III. NON MAINTENANCE OR IMPROPER MAINTENANCE OF RECORDS RELATED TO TENDER/SUB CONTRACTOR PAYMENTS. URMILA CONSTRUCTION COMPANY ITA NO.4634/MUM/2013 4 IV. ABSENCE OF PERIOD CO-RELATION BETWEEN DISCLOSED LAB OUR CHARGES, CONSUMPTION OF MAIN BUILDING MATERIALS AND RECEIPT OF INSTALLMENT OF SALE PROCEEDS OF FLAT. V. NON MAINTENANCE OR IMPROPER MAINTENANCE OF RECORDS RELATED TO WORK IN PROGRESS. 2.3. THE LD. ASSESSING OFFICER, IN VIEW OF THE ABO VE OBSERVATION, REFERRED THE MATTER TO THE DVO, WHO DI D NOT SUBMIT THE REPORT TILL 31 ST DECEMBER, 2007 AND SINCE THE ASSESSMENT WAS GETTING TIME BARRED, THE ASSESSMENT WAS FRAMED U/S 143(3) BY PUTTING A NOTE THAT THE ASSES SMENT IS SUBJECT TO RECTIFICATION PENDING DVO REPORT. THEREA FTER, ON 18/01/2010, THE ASSESSING OFFICER ISSUED NOTICE U/S 148 TO WHICH THE ASSESSEE ASKED THE REASONS FOR REOPENING THE COMPLETED ASSESSMENT. THE ASSESSING OFFICER VIDE COMMUNICATION DATED 25/02/2010 INFORMED THE ASSESSE E THAT HE HAS RECEIVED THE DVO REPORT ON 03/12/2009, WHEREIN, THE COST OF CONSTRUCTION, AS ON 31/03/2005 , HAS BEEN DETERMINED/OPINED AT RS.4.49 CRORE, THEREFORE, HE HAD REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMEN T TO THE EXTENT OF RS.2.21 CRORE, WHICH WAS PROPOSED TO BE I NCLUDED U/S 69 OF THE ACT AS INCOME OF THE ASSESSEE. 2.4. ON APPEAL, BEFORE THE LD. COMMISSIONER OF INC OME TAX (APPEALS), THE REOPENING WAS HELD TO BE INVALID . THE REVENUE IS AGGRIEVED AND IS IN APPEAL BEFORE THIS T RIBUNAL. 2.5. IF THE OBSERVATION MADE IN THE ASSESSMENT ORD ER, LEADING TO ADDITION MADE TO THE TOTAL INCOME, CONCL USION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, URMILA CONSTRUCTION COMPANY ITA NO.4634/MUM/2013 5 ASSERTIONS MADE BY THE LD. RESPECTIVE COUNSEL, IF K EPT IN JUXTAPOSITION AND ANALYZED, THE LIMITED ISSUE BEFO RE US IS WITH RESPECT TO VALIDITY OF REOPENING OF ASSESSMENT ON THE BASIS OF DVOS REPORT. THIS ISSUE HAS BEEN DECIDED BY HONBLE APEX COURT IN THE CASE OF ACIT VS DHARIYA CONSTRUCTION COMPANY 328 ITR 515 (SC). THE RELEVANT PORTION OF THE SAME IS REPRODUCED HEREUNDER:- HAVING EXAMINED THE RECORD, WE FIND THAT IN THIS C ASE, THE DEPARTMENT SOUGHT REOPENING OF THE ASSESSEE BASED O N THE OPINION GIVEN BY THE DISTRICT VALUATION OFFICER (DV O). OPINION OF THE DVO PER SE IS NOT AN INFORMATION FOR THE PUR POSES OF REOPENING ASSESSMENT UNDER SECTION 147 OF THE INCOM E TAX ACT, 1961. THE ASSESSING OFFICER HAS TO APPLY HIS MIND T O THE INFORMATION, IF ANY, COLLECTED AND MUST FORM A BELI EF THEREON. IN THE CIRCUMSTANCES, THERE IS NO MERIT IN THE CIVI L APPEAL. THE DEPARTMENT WAS NOT ENTITLED TO REOPEN THE ASSESSEE. CIVIL APPEAL IS, ACCORDINGLY, DISMISSED. NO ORDER AS TO C OSTS. 2.6. THUS, WE FIND MERIT IN THE CONTENTION OF THE ASSESSEE. IT IS WORTH NOTING THAT THE SLP OF THE D EPARTMENT AGAINST THE AFORESAID ORDER WAS DISMISSED BY HONBL E APEX COURT IN CIT VS DHARIA CONSTRUCTION COMPANY, SLP (C NO.17990 OF 2002 : (2002) 258 ITR (ST.) 74 (SC). T HE RATIO LAID DOWN BY HONBLE ALLAHABAD HIGH COURT IN CIT VS VRIN DABAN REAL ESTATE (P.) LTD. (IT APPEAL NOS. 486 OF 2008 A ND 344, 347 & 609 OF 2011) ORDER DATED 24/07/2012, JAGAT JAYANT ILAL PARIKH VS. DCIT) (2013) 355 ITR 400 (GUJ-HC) , INDIAN & EASTERN NEWSPAPER SOCIETY VS. CIT, (1979) 119 ITR 9 96 AND URMILA CONSTRUCTION COMPANY ITA NO.4634/MUM/2013 6 CIT VS MODIPON LTD., REPORTED IN 2011 334 ITR 106 S UPPORTS THE CASE OF THE ASSESSEE. THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF SATOSH KUMAR DALMIA (1994) 208 ITR 337 (CAL.) HELD THAT VALUATION REPORT CANNOT BY ITSELF FORM TH E BASIS FOR REOPENING THE ASSESSMENT. IN ANOTHER CASE OF SMT. UMA DEVI JHAVAR VS ITO 1994 TAX LR 78 (CAL.), THE HONBLE HI GH COURT HELD THAT VALUATION IS ALWAYS A QUESTION OF OPINION . EVEN AFTER 01/04/1989, THE CONCEPT OF CHANGE OF OPINION, WAS NOT REMOVED BY THE LEGISLATION. IN THE AFORESAID CASE O F DHARIA CONSTRUCTION COMPANY, WHERE DEPARTMENT SOUGHT REOPE NING OF ASSESSMENT BASED ON THE OPINION GIVEN BY THE DVO, T HE HONBLE APEX COURT HELD THAT OPINION OF DVO, PER SE IS NOT AN INFORMATION FOR THE PURPOSES OF REOPENING OF ASSESS MENT U/S 147 OF THE ACT. THUS, WE FIND NO MERIT IN THE APPEA L OF THE REVENUE, CONSEQUENTLY, DISMISSED. FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 22/09/2015. SD/ - (RAMIT KOCHAR) SD/ - (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER $ % MUMBAI; ) DATED : 30/10/2015 F{X~{T? P.S/. .. %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. +,-. / THE APPELLANT 2. /0-. / THE RESPONDENT. URMILA CONSTRUCTION COMPANY ITA NO.4634/MUM/2013 7 3. 1 1 $ 2# ( +, ) / THE CIT, MUMBAI. 4. 1 1 $ 2# / CIT(A)- , MUMBAI 5. 45 /# , 1 +,' + 6 , $ % / DR, ITAT, MUMBAI 6. 7! % / GUARD FILE. / BY ORDER, 04,# /# //TRUE COPY// / (DY./ASSTT. REGISTRAR) , $ % / ITAT, MUMBAI