M/s. Shree Rani Sati Constructions, Lucknow V. ACIT, Lucknow

ITA 50/LKW/2011

• Counselvise Citation: 5023714 RSA 2011
• Duration Of Justice: 3 year(s) 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 21-08-2014
• Assessment Year: 2001-2002
• Appeal Filed On: 28-01-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R K RAM
• Keywords: Reopening of assessment; Unexplained investment; Valuation report; Reason to believe
• Section: 69C; 143(3); 147; 69; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A , LUCKNOW BEFORE SHRI S UNIL KUMAR YADAV , JUDICIAL MEMBER AND SHRI. A. K. GARODIA , ACCOUNTANT MEMBER ITA NO S . 50 & 51/LKW/2011 ASSESSMENT YEAR S : 2001 - 02 & 2002 - 03 M/S SHREE RANI SATI CONSTRUCTION 268/641, TILAK NAGAR AISHBAGH, LUCKNOW V. ACIT - IV LUKNOW PAN: ABAFS9777M (APP ELL ANT) (RESPONDENT) APP ELL ANT BY: SHRI. RAKESH GARG, ADVOCATE RESPONDENT BY: SHRI. R. K. RAM, D.R. DATE OF HEARING: 21 0 8 2014 DATE OF PRONOUNCEMENT: 15 10 2014 O R D E R PER SUNIL KUMAR YADAV: THESE APPEALS ARE PREFERRED BY THE ASSESSEE AGAINST THE RESPECTIVE ORDER OF THE LD. CIT(A) ON VARIOUS COMMON GROUNDS EXCEPT THE DIFFERENCE IN QUANTUM OF ADDITION MADE UNDER SECTION 69 OF THE INCOME - TAX ACT, 1961 (HEREINAFTE R CALLED IN SHORT THE ACT'). FOR THE SAKE OF REFERENCE, WE EXTRACT THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN I.T.A. NO.50/LKW/2011 AS UNDER: - 1 . BECAUSE THERE BEING NO MATERIAL, FAR LESS ANY REASON TO BELIEVE, THE ENTIRE REASSESSMENT FRAMED U/S 147 IS VOID AB INITIO, WITHOUT JURISDICTION BAD IN LAW AND BE QUASHED. 2 . BECAUSE THERE BEING NO NEXUS BETWEEN THE CO - CALLED MATERIAL, IF ANY, AND THE REASONS TO BELIEVE THERE FROM, THE VERY ISSUE OF NOTICE U/S 148 IS WITHOUT JURISDICTION, BAD IN LAW, THE PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 2 - : REASSESSM ENT FRAMED BE QUASHED. 3 . BECAUSE THE CIT(A) HAS ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CASE, IN AS MUCH AS THERE IS NO DISPOSAL OF THE OBJECTIONS RAISED PURSUANT TO THE NOTICE ISSUED U/S 148 OF THE ACT. 4 . BECAUSE THERE BEING NO REJECTION OF BOOKS OF ACCOUNT AND THERE BEING NO SHOW CAUSE AS TO WHY A REFERENCE U/S 142A BE NOT MADE TO THE VALUATION OFFICER, THE VERY REFERENCE MADE TO THE VALUATION CELL IS IN A MECHANICAL MANNER WITHOUT APPLICATION OF MIND, THE CIT(A) WAS N OT JUSTIFIED IN UPHOLDING THE REFERENCE. 5 . BECAUSE THERE BEING NEITHER ANY MATERIAL, NOR ANY SATISFACTION, IN TERMS OF SECTION 69, THE REFERENCE MADE TO VALUATION CELL U/S 142A IS CONTRARY TO THE PROVISIONS OF LAW AND AS SUCH, THE CIT(A) HAS ERRED ON FACTS A ND IN LAW IN UPHOLDING IT OTHERWISE. 6 . BECAUSE NO ADDITION HAVING BEEN MADE ON THE GROUND ON WHICH THE ASSESSMENT HAS BEEN REOPENED, THE ENTIRE ASSESSMENT IS VOID AB INITIO. 7 . BECAUSE NO ADDITION HAVING BEING MADE ON THE ALLEGED ESCAPEMENT OF INCOME, NOR THERE BEING ANY DISCUSSION IN RESPECT OF THE SAME AS PER THE REASONS, RECORDED, THE ENTIRE REASSESSMENT FRAMED IS CONTRARY TO THE PROVISIONS OF LAW AND BE QUASHED. THE CIT(A) HAS WRONGLY UPHELD THE SAME TO BE VALID REASSESSMENT. 8 . BECAUSE THE CIT(A) HAS ERRED ON FACTS AND IN LAW IN UPHOLDING THE ADDITION OF RS. 31,20,301 / - AS UNEXPLAINED INVESTMENT U/S. 69 OF THE ACT MADE BY THE AO. 9 . BECAUSE THE CIT(A) HAS FAILED TO CONSIDER THE EXPLANATIONS SUBMITTED BOTH BEFORE HIM AND BEFORE THE AO AND HAS ARBITRARILY HELD THAT T HE ASSESSEE HAS UNDERSTATED THE INVESTMENT MADE WHICH IS TAXABLE U/S. 69 OF THE ACT AS PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 3 - : UNDISCLOSED INVESTMENT. 10 . BECAUSE ON A PROPER APPRAISAL OF THE FACTS IT WOULD BE FOUND THAT THE COST OF CONSTRUCTION ESTIMATED BY DVO IS NOT ONLY FACTUALLY INCORRECT, ERRO NEOUS BUT IS ALSO BASED ON IRRELEVANT MATERIAL. 11 . BECAUSE THE DVO'S REPORT IS ONLY ANOTHER ESTIMATE, HENCE IS NOT BINDING UPON THE AO, RELIANCE PLACED ON THE SAME WITHOUT CROSS - EXAMINATION OF BY THE ASSESSEE VALUER IS BAD IN LAW AND CANNOT BE ADHERED TO. 12 . BEC AUSE THE CIT(A) HAS ERRED ON FACTS AND IN LAW IN UPHOLDING THE INVESTMENT IN THE COST OF CONSTRUCTIONS IN 1ST & 2 ND FLOOR OF BLOCK NO. 2 AND BLOCK 5, WHICH WERE NEV E R CONSTRUCTED BY THE ASSESSEE. 13 . BECAUSE THE CIT(A) HAS ERRED IN UPHOLDING THE VALUE OF BLOCK NO. 07 WHICH BLOCK WAS RECEIVED BY THE APPELLANTS FULLY CONSTRUCTED (WITHOUT ROOF ON 2ND FLOOR) IN THE PURCHASE OF PROPERTY. 14 . WITHOUT PREJUDICE TO THE ABOVE GROUNDS OF APPEAL IF THE SO CALLED UNEXPLAINED EXPENSES ARE TREATED AS INC OME U/S. 69 THE AMOUNT AD DED TO WARDS THE INCOME SHOULD BE DEDUCTED FROM THE SALE PROCEEDS OF THE FLATS SOLD. 2 . THOUGH VARIOUS GROUNDS ARE RAISED, BUT THE MAIN ISSUE INVOLVED IN THESE GROUNDS IS WITH REGARD TO THE VALIDITY OF REOPENING OF ASSESSMENT AND ADDITION MADE ON THE BASIS OF REFERENCE MADE TO THE DEPARTMENTAL VALUATION OFFICER (DVO) UNDER SECTION 142 A OF THE ACT. 3 . THE FACTS IN BRIEF BORNE OUT FROM THE RECORD ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING LOSS ON 15.1.2005 THROUGH SPEED POST WHICH WAS TREATED TO BE NON EST, AS IT WAS NOT FILED BEFORE THE DUE DATE FOR FILING THE RETURN. THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT WAS PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 4 - : FRAMED FOR BOTH THE ASSESSMENT YEARS VIDE ORDER DATED 28.3.2006. THE ASSESSEE OBJECTED TO THE ASSESSMENT ORDER IN APPEAL BEFORE THE LD. CIT(A), WHO VIDE HIS ORDER DATED 31.2007 DISMISSED THE APPEAL S FOR BOTH THE ASSESSMENT YEARS AND UPHELD THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED INVESTMENT IN THE PROPERTY UNDER SECTION 69 OF THE ACT. SECOND APPEAL WAS PRE FERRED BEFORE THE T RIBUNAL. THE TRIBUNAL SET ASIDE THE ORDER OF THE LD. CIT(A) VIDE ITS ORDER DATED 8.11.2007 AND RESTORED THE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO DECIDE THE OBJECTIONS RAISED BY THE ASSESSEE AS PER NORMS LAID D OWN BY THE HON'BLE HIGH COURT AND TO PASS A SEPARATE SPEAKING ORDER ON THE OBJECTIONS WHICH HAD BEEN FILED BY THE ASSESSEE AND PROCEED FURTHER IN ACCORDANCE WITH LAW. CONSEQUENTLY, ASSESSMENT WAS FRAMED AND THE ASSESSING OFFICER MADE ADDITION UNDER SECTIO N 69 OF THE ACT AT RS.31,20,301/ - IN ASSESSMENT YEAR 2001 - 02 AND RS.22,96,745/ - IN ASSESSMENT YEAR 2002 - 03 ON ACCOUNT OF UNEXPLAINED INVESTMENT IN THE PROPERTY. 4 . CONSEQUENTLY APPEALS WERE FILED BEFORE THE LD. CIT(A) BUT DID NOT FIND FAVOUR WITH HIM. 5 . NOW THE ASSESSEE IS BEFORE THE TRIBUNAL. BESIDE ASSAILING THE VALIDITY OF REOPENING OF ASSESSMENT, THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT EVEN IF THE REOPENING OF ASSESSMENT IS HELD TO BE VALID , THE ADDITION MADE ON THE BASIS OF DVOS REPORT IS NOT SUSTAINABLE IN THE LIGHT OF THE JUDGMENT OF THE HON'BLE APEX COURT IN THE CASE OF SARGAM CINEMA VS. CIT [2010] 328 ITR 513 (SC). THE LD. COUNSEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION TO THE PROCEEDINGS RECORDED IN THE ORDER SHEET OF THE ASSESSING OFF ICER WHICH ARE AVAILABLE ON RECORD, WITH THE SUBMISSION THAT ON THE BASIS OF THE INFORMATION RECEIVED FROM THE ASSESSMENT PROCEEDINGS IN THE CASE OF SHRI. KHEM CH AND AGARWAL, RAKABGANJ, LUCKNOW, WHO HAD CONSTRUCTED A PROPERTY JOINTLY WITH FIVE PERSONS AND THE PRESENT ASSESSEE HAS NOT DISCLOSED THE INCOME FROM SALE OF FLATS CONSTRUCTED THEREON, ASSESSMENT PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 5 - : WAS REOPENED IN THE CASE OF THE ASSESSEE AFTER RECORDING REASONS ON 18.1.2005 AND NOTICE WAS ALSO ISSUED UNDER SECTION 148 OF THE ACT. THE ASSESSEE HAS AL READY SUBMITTED RETURN OF INCOME THROUGH SPEED POST ON 15.1.2005 THOUGH IT WAS A BELATED RETURN, BUT AS PER ASSESSMENT PROCEEDINGS , THE ASSESSING OFFICER HAS ISSUED A NOTICE UNDER SECTION 143(2) OF THE ACT ON 2.2.2005 FIXING THE HEARING ON 2.2.2005. AGAIN ON 13.7.2005 NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED FOR HEARING ON 9.8.2005. THEREAFTER THE HEARING WAS FURTHER ADJOURNED TO 29.8.2005; 21.9.2005 AND 4.12.2005. ON 13.7.2005 NOTICE WAS ISSUED UNDER SECTION 143(2) OF THE ACT FOR HEARING ON 9.8 .2005 AND BY THAT TIME , THE ASSESSING OFFICER HAS NOT ASKED THE ASSESSEE EVEN TO PRODUCE THE BOOKS OF ACCOUNT AND OTHER RELEVANT RECORD WITH REGARD TO THE INVESTMENT IN CONSTRUCTION OF THE PROPERTY. BUT VIDE HIS LETTER DATED 9.2.2005, THE ASSESSING OFFICE R HAS MADE A REFERENCE TO THE DVO FOR THE VALUATION OF THE INVESTMENT IN THE PROPERTY SITUATED AT 268/641, TILAK NAGAR, AISHBAGH, LUCKNOW. 6 . THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT AT THE RELEVANT POINT OF TIME, THE ASSESSING OFFICER HAS SIMPLY ISSUED A NOTICE UNDER SECTION 143(2) ON 2.2.2005 FIXING THE HEARING ON 11.2.2005 AND THEREAFTER AGAIN NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED ON 13.7.2005 F IXING THE HEARING ON 9.8.2005. EVEN WITHOUT RECEIVING A REPLY IN RESPONSE TO NOTICE UNDE R SECTION 143(2) OF THE ACT, THE ASSESSING OFFICER HAS MADE A REFERENCE TO THE DVO UNDER SECTION 142A OF THE ACT FOR ESTIMATING THE COST OF INVESTMENT IN THE IMPUGNED PROPERTY. IN SUPPORT OF THESE SUBMISSIONS, THE LD. COUNSEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION TO THE VALUATION REPORT SUBMITTED BY THE DVO WHICH WAS USED BY THE ASSESSING OFFICER FOR MAKING ADDITION ON ACCOUNT OF UNEXPLAI NED INVESTMENT UNDER SECTION 69 OF THE ACT. THE LD. COUNSEL FOR THE ASSESSEE HAS FURTHER CONTENDED THAT IN THE LIG HT OF THE JUDGMENT OF THE HON'BLE APEX COURT IN THE CASE OF SARGAM CINEMA VS. CIT (SUPRA), REFERENCE CAN BE MADE TO THE DVO FOR ESTIMATING THE COST OF PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 6 - : CONSTRUCTION ONLY AFTER REJECTING THE BOOKS OF ACCOUNT. IN THE INSTANT CASE, T HE ASSESSING OFFICER HAS M ADE A REFERENCE EVEN WITHOUT WAITING FOR REPLY TO THE NOTICE ISSUED UNDER SECTION 143(2) OF THE ACT. THE RIGHT COURSE FOR MAKING REFERENCE IN THE INSTANT CASE WOULD HAVE BEEN ONLY AFTER EXAMINING THE BOOKS OF ACCOUNT REL A TING TO THE INVESTMENT IN THE PROP ERTY. IF THE ASSESSING OFFICER NOTICES SOME IRREGULARITIES IN THE MAINTENANCE IN THE BOOKS OF ACCOUNT FOR INVESTMENT, THEN THE ASSESSING OFFICER CAN REJECT THE BOOKS OF ACCOUNT AND MAKE REFERENCE TO THE DVO FOR VALUING THE COST OF INVESTMENT IN THE PROPER TY. BUT IN THE INSTANT CASE, THE ASSESSING OFFICER WAS IN SUCH A HURRY AND INSTEAD OF WAITING FOR THE REPLY TO THE NOTICE UNDER SECTION 143(2) OF THE ACT, HE MADE A REFERENCE TO THE DVO. THEREFORE, REFERENCE TO THE DVO IS ILLEGAL AND INVALID AND ANY ASSE SSMENT FRAMED ON THE BASIS OF DVOS REPORT IS NOT SUSTAINABLE IN THE EYES OF LAW. 7 . THE LD. D.R., ON THE OTHER HAND, HAS SUBMITTED THAT HAVING RECEIVED INFORMATION WITH REGARD TO THE UNEXPLAINED INVESTMENT IN THE PROPERTY, THE ASSESSING OFFICER HAS ISSUED NO TICE UNDER SECTION 148 OF THE ACT AFTER FORMING A BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THEREFORE, IN ORDER TO ASSESS THE UNEXPLAINED INVESTMENT IN THE PROPERTY, REFERENCE WAS MADE TO THE DVO , THEREFORE, THERE IS NO ILLEGALITY OR IR REGULARITY THEREIN. 2 . HAVING GIVEN A THOUGHTFUL CONSIDERATION TO THE RIVAL SUBMISSIONS AND FROM A CAREFUL PERUSAL OF THE ORDERS OF THE AUTHORITIES BELOW, WE FIND THAT THE ASSESSING OFFICER HAS RECEIVED CERTAIN INFORMATION WITH REGARD TO THE UNEXPLAINED INVES TMENT IN THE PROPERTY BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN THE CASE OF SHRI. KHEM CHAND AGARWAL, RAKABGANJ, LUCKNOW AND ON THE BASIS OF SUCH INFORMATION, THE ASSESSING OFFICER HAS FORMED A BELIEF THAT UNEXPLAINED INVESTMENT IN THE PROPERTY WAS MADE BY THE ASSESSEE AND LATER ON CONSTRUCTED FLATS WHICH WERE SOLD AND NO INCOME WAS OFFERED THEREON. ON THE BASIS OF THIS PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 7 - : INFORMATION, THE ASSESSING OFFICER HAS FORMED A BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT AND ISSUE D NOTICE UNDER SECTION 148 OF THE ACT. UPTO THIS STAGE, WE DO NOT FIND ANY ILLEGALITY IN THE FORMATION OF BELIEF AND ISSUANCE OF NOTICE UNDER SECTION 148 OF THE ACT. THE NOTICE UNDER SECTION 148 OF THE ACT WAS ISSUED ON 18.1.2005 THOUGH IN BOTH THE YEAR S RETURNS OF INCOME WERE FILED DECLARING LOSS THROUGH SPEED POST ON 15.1.2005 AS PER THE ORDER OF THE LD. CIT(A). BUT THESE RETURNS WERE TREATED TO BE NON EST IN LAW, AS THEY WERE BELATED. THERE IS NOTHING BORNE OUT FROM THE ORDER SHEET RECORDED BY THE A SSESSING OFFICER WITH REGARD TO THE FILING OF RETURN IN RESPONSE TO NOTICE UNDER SECTION 148 OF THE ACT. THE NOTICE UNDER SECTION 148 OF THE ACT WAS ISSUED ONLY ON 18.1.2005 AND IMMEDIATELY THEREAFTER ON 2.2.2005 NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED FIXING THE HEARING ON 11.2.2005. IT IS ALSO NOT CLEAR FROM THIS ORDER SHEET WHETHER RETURN IN RESPONSE TO NOTICE UNDER SECTION 148 OF THE ACT WAS FILED OR NOT. BUT WHEN THE ASSESSING OFFICER HAS ISSUED NOTICE UNDER SECTION 143(2) OF THE ACT FIXIN G THE HEARING ON 11.2.2005, HE SHOULD HAVE WAITED FOR THE REPLY OF THE ASSESSEE IN RESPONSE TO THAT NOTICE. INSTEAD OF WAITING FOR THE REPLY, THE ASSESSING OFFICER WAS IN A HURRY TO MAKE REFERENCE TO THE DVO ON 9.2.2005. THEREFORE, WE ARE OF THE VIEW THA T THE ACTION OF THE ASSESSING OFFICER IS HIGHLY OBJECTIONABLE AND CANNOT BE APPRECIATED. 3 . IN THE CASE OF SARGAM CINEMA VS. CIT (SUPRA), THE HON'BLE SUPREME COURT HAS CATEGORICALLY HELD THAT BEFORE MAKING REFERENCE TO THE DVO FOR ESTIMATING THE COST OF INV ESTMENT IN THE CONSTRUCTION OF PROPERTY, THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE IN THIS REGARD HAS TO BE REJECTED, BUT IN THE INSTANT CASE, THE ASSESSING OFFICER DID NOT EVEN WAIT FOR REPLY TO BE FILED IN RESPONSE TO NOTICE UNDER SECTION 143(2) OF THE ACT AND WHAT TO SAY ABOUT THE BOOKS OF ACCOUNT ; AND HE MADE A REFERENCE TO THE DVO UNDER SECTION 142A OF THE ACT FOR ESTIMATING THE COST OF INVESTMENT IN PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ ) : - 8 - : THE PROPERTY. NOTHING IS AVAILABLE ON RECORD ON WHAT BASIS THE ASSESSING OFFICER HAS FORMED A BE LIEF THAT THE ASSESSEE HAS NOT MAINTAINED PROPER ACCOUNT FOR THE INVESTMENT IN THE PROPERTY. THEREFORE, WE HAVE NO HESITATION IN HOLD ING THAT THE REFERENCE MADE BY THE ASSESSING OFFICER TO THE DVO VIDE HIS LETTER DATED 9.2.2005 IS ILLEGAL, INVALID AND CAN NOT BE RELIED ON FOR ESTIMATING THE COST OF CONSTRUCTION IN THE PROPERTY. THE ASSESSING OFFICER HAS BLINDLY FOLLOWED THE DVOS REPORT OF WHICH REFERENCE IS INVALID AND MADE ADDITION UNDER SECTION 69C OF THE ACT , WHICH ARE TOTALLY UNSUSTAINABLE IN THE EYES OF LAW. WE ACCORDINGLY DELETE THE ADDITION MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT IN THE PROPERTY BASED ON THE DVOS REPORT. ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 8 . IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENT I ONED ON THE CAPTION PAGE. SD/ - SD/ - [ A. K. GARODIA ] [ S UNIL KUMAR Y ADAV ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 15 TH OCTOBER , 2014 JJ: 2209 COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR AS SISTANT REGISTRAR PRINT TO PDF WITHOUT THIS MESSAGE BY PURCHASING NOVAPDF ( HTTP://WWW.NOVAPDF.COM/ )