Appeal details
Counselvise Citation
[2010] 135 COUNSELVISE.COM (IT) 2683 (ITAT-VISAKHAPATNAM)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 1 month(s) 10 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
18-11-2010
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
DB
Next Hearing Date
23-09-2010
Assessment Year
2001-2002
Appeal Filed On
08-10-2008
Judgement Text
ITA NO.509 TO 511/VIZAG/2008 - CH. VIJAYA KUMARI, CH.RATNA KISHOREVJA PAGE 1 OF 12 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO.509&510/VIZAG/2008 ASSESSMENT YEARS: 2001-02 & 2002-03 RESPECTIVELY CHAGARLAMUDI VIJAYA KUMARI VIJAYAWADA VS. ACIT, CIRCLE-2(1) VIJAYAWADA (APPELLANT) PAN NO: AAZPC 9819N (RESPONDENT) ITA NO.511/VIZAG/2008 ASSESSMENT YEAR: 2001-02 CHAGARLAMUDI RATNA KISHORE VIJAYAWADA VS. ACIT, CIRCLE-2(1) VIJAYAWADA (APPELLANT) PAN NO: ABJPC 1791J (RESPONDENT) APPELLANT BY: SHRI C. SUBRAHMANYAM, CA RESPONDENT BY: SHRI SUBRATA SARKAR, CIT(DR) ORDER PER BENCH: ALL THESE THREE APPEALS, FILED AT THE INSTANCE OF THE ASSESSEES, ARE DIRECTED AGAINST THE SEPARATE ORDERS PASSED BY LD C IT(A), VIJAYAWADA IN THEIR RESPECTIVE HANDS. WHILE THE ASSESSEE NAMED C H.VIJAYAKUMARI HAS FILED APPEALS FOR THE ASSESSMENT YEARS 2001-02 AND 2002-03, THE OTHER ASSESSEE NAMED CH.RATNA KISHORE HAS FILED THE APPEA L FOR ASST. YEAR 2001- 02 ONLY. SMT. CH.VIJAYAKUMAR IS THE SPOUSE OF SHRI CH.RATNA KISHORE. SINCE THE ISSUES URGED IN THESE APPEALS ARE IDENTIC AL IN NATURE AND ARE ARISING OUT OF COMMON SET OF FACTS, THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2. BOTH THE ASSESSEES HAVE RAISED MANY GROUNDS IN THEIR RESPECTIVE APPEALS. SUBSEQUENTLY, BOTH THE ASSESSEES HAVE ALS O FILED MANY ADDITIONAL GROUNDS, WHICH ARE LEGAL IN NATURE. ALL THE GROUND S RAISED BY THESE ASSESSEES GIVE RISE TO A SINGLE ISSUE VIZ., WHETHER , IN THE FACTS AND ITA NO.509 TO 511/VIZAG/2008 - CH. VIJAYA KUMARI, CH.RATNA KISHOREVJA PAGE 2 OF 12 CIRCUMSTANCES OF THE CASE, ANY ADDITION IS WARRANTE D ON ACCOUNT OF DIFFERENCE IN THE COST OF CONSTRUCTION OF THE BUILD INGS. 3. THE FACTS NECESSARY FOR THE DISPOSAL OF THE ISSUE BEFORE US ARE SET OUT IN BRIEF. IT IS PERTINENT TO NOTE THAT THE IMPUGNE D ASSESSMENT ORDERS HAVE BEEN PASSED BY THE ASSESSING OFFICER IN CONSEQUENCE TO THE SETTING ASIDE OF THE ISSUE TO HIS FILE BY THE ITAT. FURTHER, WE NOTI CE THAT THE BOTH THE ASSESSING OFFICER AS WELL AS THE LEARNED CIT(A) HAS PLACED MUCH RELIANCE ON THE ORDERS PASSED BY THEIR PREDECESSORS IN THE E ARLIER ROUND OF PROCEEDINGS, PARTICULARLY IN THE BLOCK ASSESSMENT P ROCEEDINGS. HENCE WE FIND IT NECESSARY TO DISCUSS THE EVENTS THAT TOOK P LACE IN THE FIRST ROUND OF APPEAL IN ORDER TO UNDERSTAND THE FACTS SURROUNDING THE ISSUE URGED IN THE PRESENT APPEALS. 3.1 BOTH THE ASSESSEES HAVE JOINTLY CONSTRUCTED A BUILDING NAMED SASANK TOWERS (JOINT PROPERTY) DURING THE YEARS RELEVANT TO THE ASSESSMENT YEARS 2000-01 AND 2001-02. THE ASSESSEE NAMED CH.VIJAYAKU MARI ALONE HAS CONSTRUCTED ANOTHER BUILDING NAMED SASANK ESTATES (INDIVIDUAL PROPERTY) DURING THE YEARS RELEVANT TO THE ASSESSMENT YEARS 2 001-02 AND 2002-03. A SEARCH AND SEIZURE OPERATION WAS CARRIED OUT BY THE DEPARTMENT IN THE HANDS OF BOTH THE ASSESSEES ON 21.11.2001. DURING THE COURSE OF SEARCH, AN ESTIMATE PREPARED FOR THE PROPOSED CONSTRUCTION OF THE JOINT PROPERTY WAS FOUND. SIMILARLY, A VALUATION REPORT PREPARED BY A BANK, IN ORDER TO ASSESS THE FAIR MARKET VALUE OF THE INDIVIDUAL PROP ERTY WAS ALSO FOUND. BESIDES THE ABOVE, THE DEPARTMENT ALSO SEIZED THE B OOKS OF ACCOUNTS, VOUCHERS AND BILLS IN RESPECT OF THE CONSTRUCTION O F THE ABOVE SAID PROPERTIES. 3.2 DURING THE COURSE OF SEARCH PROCEEDINGS, A SWORN STATEMENT WAS RECORDED ON 21.12.2001 FROM CH.RATNA KISHORE, WHERE IN HE ADMITTED A SUM OF RS.75.00 LAKHS AS ADDITIONAL INCOME ON ACCOU NT OF DEFECTS IN THE MAINTENANCE OF CONSTRUCTION DETAILS. HOWEVER, HE R ETRACTED THE SAID ADMISSION LATER. IN THE BLOCK ASSESSMENT PROCEEDIN GS, BOTH THE ASSESSEES ITA NO.509 TO 511/VIZAG/2008 - CH. VIJAYA KUMARI, CH.RATNA KISHOREVJA PAGE 3 OF 12 FILED THEIR RESPECTIVE BLOCK RETURN DECLARING NIL IN COME. HOWEVER, THE ASSESSING OFFICER REFERRED THE MATTER OF VALUATION OF BOTH THE PROPERTIES TO THE DVO, BY PLACING RELIANCE ON THE DOCUMENTS CITED ABOVE AND ALSO THE ADMISSION MADE BY THE ASSESSEE. ACCORDINGLY THE DIF FERENCE BETWEEN THE VALUE DETERMINED BY THE DVO AND THE COST DECLARED B Y THE ASSESSEE WAS TREATED AS THE UNDISCLOSED INCOME IN THE HANDS OF T HESE ASSESSEES. THE DIFFERENCE WORKED FOR THE JOINT FAMILY PROPERTY WAS DISTRIBUTED EQUALLY IN THE HANDS OF BOTH THE ASSESSEES. FOR THE SAFER COU RSE, THE ASSESSING OFFICER ALSO ASSESSED THE SAID DIFFERENCE, ON PROTE CTIVE BASIS, IN THE REGULAR ASSESSMENT ALSO. BOTH THE ASSESSEES CHALLENGED BOT H THE BLOCK ASSESSMENT ORDER AS WELL AS THE REGULAR ASSESSMENT ORDER BEFORE THE LD CIT(A). THE FIRST APPELLATE AUTHORITY PARTIALLY CO NFIRMED THE ADDITION MADE IN THE BLOCK ASSESSMENT ORDER, I.E. HE DIRECTED THA T A DEDUCTION OF 15% TOWARDS THE DIFFERENCE IN THE COST OF MATERIALS AND 10% TOWARDS PERSONAL SUPERVISION BE ALLOWED FROM THE VALUE DETERMINED BY THE DVO. IN THE APPEALS FILED AGAINST THE REGULAR ASSESSMENT, HE DE LETED THE PROTECTIVE ADDITIONS, SINCE HE HAD ALREADY CONFIRMED THE ADDIT IONS MADE IN THE BLOCK ASSESSMENTS. 3.3 THE ASSESSEES AS WELL AS THE DEPARTMENT CHAL LENGED THE ORDERS OF LD CIT(A) PASSED AGAINST THE BLOCK ASSESSMENT AND ALSO THE REGULAR ASSESSMENT BEFORE THE TRIBUNAL. WITH REGARD TO THE APPEALS PERTAINING TO THE BLOCK ASSESSMENT PROCEEDINGS, THE TRIBUNAL, VID E ITS COMMON ORDER DATED 27-07-2006, ALLOWED THE APPEALS OF THE ASSESS EES BY HOLDING THAT THERE WAS A VALID RETRACTION OF STATEMENT MADE U/S 132(4) BY SHRI CH.RATNA KISHORE AND ACCORDINGLY HELD THAT THE SAID STATEMEN T IS NOT BINDING ON THESE TWO ASSESSEES AND THE SAME CANNOT BE USED AS EVIDENCE AGAINST THEM. WITH REGARD TO THE ESTIMATION OF BUILDING CO NSTRUCTION AND VALUATION REPORT SEIZED DURING THE COURSE OF SEARCH, THE TRIB UNAL HELD THAT THE SAID TWO DOCUMENTS CANNOT BE CONSIDERED AS DOCUMENTS EVI DENCING THE COST OF CONSTRUCTION INCURRED BY THESE ASSESSEES. ACCORDIN GLY THE TRIBUNAL DIRECTED THE ASSESSING OFFICER TO DELETE THE ENTIRE ADDITION S MADE IN THE BLOCK ITA NO.509 TO 511/VIZAG/2008 - CH. VIJAYA KUMARI, CH.RATNA KISHOREVJA PAGE 4 OF 12 ASSESSMENT PROCEEDINGS ON ACCOUNT OF DIFFERENCE IN THE COST OF CONSTRUCTION IN RESPECT OF BOTH THE BUILDINGS. 3.4 IN RESPECT OF THE APPEALS FILED AGAINST THE REGU LAR ASSESSMENTS, WHEREIN PROTECTIVE ADDITIONS WERE MADE, THE TRIBUNA L, VIDE ITS ORDER DATED 27-07-2006, SET ASIDE THE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH THE FOLLOWING OBSERVATIONS: NOW, IN THESE APPEALS, WHETHER THERE IS LEGAL MAT ERIAL OR EVIDENCE IN POSSESSION OF ASSESSING OFFICER OR WHET HER ANY ADDITION AS UNEXPLAINED INVESTMENT IN CONSTRUCTION OF THE AFORESAID TWO PROPERTIES CAN LEGALLY OR FACTUALLY B E MADE REMAINS AN OPEN SUBJECT IN REGULAR ASSESSMENT ON WHICH THE ASSESSING OFFICER HAS TO FORM AN OPINION IN THE LIGHT OF THE FACT THAT HE ONLY MADE A PROTECTIVE AD DITION. THE LD CIT(A) ALSO DID NOT CONSIDER THE ISSUES RAIS ED BY THE APPELLANTS THROUGH THEIR WRITTEN SUBMISSIONS AT PA PER BOOK PAGES 298 TO 300, WHICH NEED FACTUAL VERIFICATION B EFORE COMING TO ANY CONCLUSION. PARTIES HAVE AGREED THAT THE ASSESSMENTS BE SET ASIDE AND MATTER RESTORED BACK T O THE ASSESSING OFFICER FOR FRESH CONSIDERATION. WE, THE REFORE, SET ASIDE THE ASSESSMENTS AND RESTORE THE MATTER FOR FR ESH CONSIDERATION IN THE LIGHT OF AFORESAID OBSERVATION S AND TAKE DECISIONS IN ACCORDANCE WITH LAW. HE SHALL, HOWEVE R, PROVIDE REASONABLE AND EFFECTIVE OPPORTUNITY OF BEI NG HEARD TO THE PARTIES. THUS THE ISSUE UNDER CONSIDERATION IN THE HANDS OF BOTH THE ASSESSEES WAS RESTORED TO THE FILE OF THE ASSESSING OFFICER; VIDE THE ORDER OF TRIBUNAL CITED ABOVE. 4. FOR FINALIZING THE ASSESSMENT SO SET SIDE BY THE TRIBUNAL, THE ASSESSING OFFICER ADOPTED THE VALUE DETERMINED BY THE DVO IN THE VALUATION REPORT OBTAINED DURING THE COURSE OF BLOCK ASSESSMENT PROC EEDINGS AND GAVE FURTHER DEDUCTIONS FROM THAT VALUE, I.E. THE ASSESS ING OFFICER ALLOWED DEDUCTION OF 15% TOWARDS THE DIFFERENCE IN THE COST OF MATERIALS AND A FURTHER 10% ON ACCOUNT OF PERSONAL SUPERVISION CITI NG THE DECISION OF THE TRIBUNAL IN THE CASE OF SALMA A MEHDI (REFERENCE NO T GIVEN BY THE A.O.). ACCORDINGLY THE ASSESSING OFFICER ARRIVED AT THE DI FFERENCE IN THE COST OF CONSTRUCTION OF BOTH THE BUILDINGS. THE DIFFERENCE SO ARRIVED FOR THE JOINT ITA NO.509 TO 511/VIZAG/2008 - CH. VIJAYA KUMARI, CH.RATNA KISHOREVJA PAGE 5 OF 12 PROPERTY WAS DISTRIBUTED EQUALLY IN THE HANDS OF BO TH THE ASSESSEES. THE DIFFERENCE ARRIVED FOR THE INDIVIDUAL PROPERTY WAS ADDED IN THE HANDS OF SMT. CH. VIJAYA KUMARI. 4.1 THE ASSESSING OFFICER, IN THE INSTANT CASES, HAS PLACED RELIANCE ON THE ORDERS PASSED IN THE BLOCK ASSESSMENT PROCEEDINGS. HE FURTHER ADOPTED THE REPORT OF THE DVO OBTAINED IN THE BLOCK ASSESSMENT PROCEEDINGS WITH THE FOLLOWING REASONING: A) IT IS TO BE MENTIONED HERE THAT THE INCOME TAX ACT, 1961 HAS BEEN AMENDED BY INTRODUCING SECTION 142A BY THE FIN ANCE ACT, 2004 WITH RETROSPECTIVE EFFECT FROM 15.11.1972. AS PER THE P ROVISIONS OF SECTION 142A OF THE I.T. ACT, THE A.O MAY REQUIRE THE VALUATION O FFICER TO MAKE AN ESTIMATE OF THE VALUE ANY INVESTMENT FOR THE PURPOS ES OF ASSESSMENT OR RE- ASSESSMENT UNDER THIS ACT. HENCE, THE REFERENCE MA DE IN HER CASE IS BINDING ON BOTH THE PARTIES. B) THE VALUATION REPORT FURNISHED BY THE DVO IS B INDING ON THE A.O AND SUITABLE DEDUCTION AND REBATE WERE SUBSEQUENTLY CONSIDERED. C) DURING THE COURSE OF SEARCH AND SEIZURE OPERAT ION, IT IS NOTICED THAT THE .. DETAILS OF COST OF CONSTRUCTION HAS NO T BEEN MAINTAINED PROPERLY. D) IT IS ALSO FOUND THAT THE ASSESSEE COULD NOT SU BSTANTIATE THE SOURCES OF INVESTMENT AND ACCORDINGLY, SHE HAS DISC LOSED AN AMOUNT OF RS.75 LAKHS OVER AND ABOVE THE INCOME ADMITTED AS T HE UNDISCLOSED INVESTMENT. 5. THE LEARNED CIT(A) ALSO CONFIRMED THE ADDITI ON MADE BY THE ASSESSING OFFICER AND HE ALSO PLACED RELIANCE ON TH E ORDERS PASSED BY HIS PREDECESSOR IN THE BLOCK ASSESSMENT PROCEEDINGS. T HE RELEVANT OBSERVATIONS MADE BY HIM ARE EXTRACTED BELOW: A) DURING THE SEARCH, THE ASSESSEE HAD ADMITTED IN SWORN DEPOSITION THAT ALL THE INDIVIDUAL EXPENSES ARE NOT FULLY VOUC HED AND THE CONSTRUCTION ACCOUNT WAS NOT PROPERLY MAINTAINED AND THE APPELLA NT VOLUNTARILY MADE DECLARATION OF RS.75.00 LAKHS AS UNEXPLAINED INVEST MENT IN THE CONSTRUCTION THUS, THIS VOLUNTARY SWORN DEPOSITIO N GIVEN ONE MONTH AFTER THE SEARCH HAS EVIDENTIARY VALUE. B) THE SEIZED VALUATION REPORTS GIVE HIGHER COS T OF CONSTRUCTION. DURING BLOCK ASSESSMENT PROCEEDINGS, ASSESSEE FILED WRITTEN SUBMISSION DT. 24.11.2003 WITH A REQUEST TO ACCEPT THE COSTS AS SH OWN IN THESE SEIZED VALUATION REPORTS. IT IS THEREFORE CLEAR THAT COST OF CONSTRUCTION SHOWN IN ITA NO.509 TO 511/VIZAG/2008 - CH. VIJAYA KUMARI, CH.RATNA KISHOREVJA PAGE 6 OF 12 THE BOOKS OF ACCOUNT IS CERTAINLY NOT CORRECT. THU S, ASSESSEE HAD CLEARLY ADMITTED THAT THERE WERE CERTAIN DISCREPANCIES BETW EEN THE COST AS PER VALUATION REPORT FOUND AND SEIZED AND CONSTRUCTION ACCOUNT.. THEY THEMSELVES (APPELLANT AND HIS WIFE) REJECTED THE BO OKS BY ADMITTING IN THEIR SWORN DEPOSITIONS THAT THE CONSTRUCTION ACCOUNT IS NOT PROPERLY MAINTAINED AND VOUCHERS ARE NOT AVAILABLE. 6. ON A CAREFUL PERUSAL OF THE OBSERVATIONS OF TH E TAX AUTHORITIES EXTRACTED ABOVE, IT COULD BE NOTICED THAT THEY HAVE RESTED TH EIR RESPECTIVE DECISIONS MAINLY ON THE FOLLOWING POINTS. A) ADMISSION MADE IN THE SWORN STATEMENT. B) THERE IS A FINDING IN THE BLOCK ASSESSMENT PROCEEDI NGS THAT THE DETAILS OF CONSTRUCTION ARE NOT MAINTAINED PROPERLY . CERTAIN DOCUMENTS EVIDENCING THE ESTIMATES WERE SEIZED DURI NG THE COURSE OF SEARCH PROCEEDING. C) SECTION 142A AUTHORIZES THE ASSESSING OFFICER TO MA KE A REFERENCE TO THE DVO. D) THE REPORT GIVEN BY THE DVO IS BINDING ON THE ASSES SING OFFICER. 7. HOWEVER, IT IS PERTINENT TO NOTE THAT THE TR IBUNAL HAS DEALT WITH THE FIRST TWO ISSUES CITED IN PARA 6 (SUPRA) IN ITS ORD ER PASSED IN THE APPEALS FILED AGAINST THE BLOCK ASSESSMENT PROCEEDINGS. HE NCE IT IS PERTINENT TO EXTRACT THE DECISION REACHED BY THE TRIBUNAL ON EAC H OF THE ISSUES BELOW. WITH REGARD TO THE ADMISSION MADE IN THE SWORN STAT EMENT, THE TRIBUNAL HAS OBSERVED AS UNDER. 20. AS REGARDS THE FIRST QUESTION, WE HAVE PERUSE D THE STATEMENT RECORDED UNDER SECTION 132(4) OF THE ACT ON 21.12.01. THE SAME IS PLACED AT ASSESSEES PAPER B OOK PAGE 346 AND 347. IN THIS STATEMENT, THE AUTHORISED OFF ICER, SRI MA RAHIM HAS ADMINISTERED OATH TO SRI CH. RATNA KIS HORE. NO OATH, HOWEVER HAS BEEN ADMINISTERED TO THE APPELLAN T SMT. CH. VIJAYA KUMARI WHO HAS ONLY SIGNED THE SAID STAT EMENT AS A PERSON IN WHOSE PRESENCE SUCH STATEMENT HAS BEEN RECORDED BY AUTHORISED OFFICER AND A DEPOSITION HAS BEEN MADE BY CH. RATNA KISHORE. THE ESSENTIALS OF VALID STATEMENT, THEREFORE, HAVE NOT BEEN SATISFIED. SUC H A STATEMENT, THEREFORE, IS NOT ADMISSIBLE IN EVIDENCE IN TERMS OF SEC. 132(4) OF THE IT ACT. 1961 AGAINST THE APPELLA NT SMT. CH. VIJAYA KUMARI FOR MAKING ASSESSMENT OF HER UNDISCLO SED INCOME AS THERE IS NO VALID STATEMENT MADE BY THE A PPELLANT ITA NO.509 TO 511/VIZAG/2008 - CH. VIJAYA KUMARI, CH.RATNA KISHOREVJA PAGE 7 OF 12 UNDER SECTION 132(4) OF THE ACT IN VIEW OF THE JUDG MENT OF THE HON'BLE HIGH COURT JUDICATURE AT ANDHRA PRADESH IN THE CASE OF ASSISTANT COMMISSIONER OF INCOME TAX VS. YER RA NAGABHUSHANAM (1997) (226 ITR 843) AT PAGE 849 WHIC H HAS LAID DOWN TWO ESSENTIALS FOR A STATEMENT TO BE ADMI SSIBLE IN EVIDENCE IN TERMS OF SEC. 132(4) OF THE ACT AS UNDE R: FROM THIS IT FOLLOWS THAT FOR A STATEMENT TO BE AD MISSIBLE IN EVIDENCE IN TERMS OF SEC. 132(4) OF THE IT ACT, IT MUST BE ONE RECORDED BY THE AUTHORISED OFFICER DURING THE S EARCH AND SUCH A STATEMENT SHOULD HAVE BEEN OBTAINED ON OATH. UNLESS THESE TWO BASIC REQUIREMENTS ARE FULFILLED SUCH A S TATEMENT CANNOT BE USED AS EVIDENCE IN SUBSEQUENT PROCEEDING S UNDER THE IT ACT. 21. SHRI CH. RATNA KISHORE, HOWEVER HAS MADE A STA TEMENT UNDER SECTION 132(4) OF THE ACT AND IS A CO OWNER I N ONLY ONE PROPERTY KNOWN AS SASANK TOWERS. IN REPLY TO QUE STION NO.3 RAISED IN THE STATEMENT, SAID SRI CH. RATNA KISHORE HAS STATED AS UNDER: THE BANK VALUERS HAVE GIVEN THE REPORT FOR THE PU RPOSE OF LOAN. IT CANNOT BE SAID THAT THEY ESTIMATED THE ACTUAL COST. HOWEVER, WE ADMIT THAT THERE ARE SOME DEFICIENCIES SUCH AS NON MAINTENANCE OF CONSTRUCTION AND ABSENCE OF BILL S FOR CERTAIN ITEMS OF CONSTRUCTION. TAKING INTO ACCOUNT THESE DEFECTS, WE ARE DECLARING AMOUNT OF RS.75 LAKHS (RU PEES 75 LAKHS ONLY). AS WE HAVE DECLARED THE INCOME VOLUNT ARILY, WE PLEAD THAT PENAL AND PROSECUTION PROCEEDING SHOULD NOT BE INITIATED AGAINST US. THE SAID SWORN STATEMENT SHOWS THAT SEARCH DID NOT RESULT IN OTHER MATERIAL EXCEPT ESTIMATES FOUND DURING THE COURSE OF SEARCH. IT HAS BEEN CATEGORICALLY STATED BY THE DEP ONENT THAT ESTIMATES WERE OBTAINED FOR THE PURPOSE OF BANK LOA N AND DO NOT REPRESENT THE ACTUAL COST. IT IS ALSO DEPOSED T HAT THE ENTIRE EXPENDITURE WERE RECORDED THOUGH SOME OF THE BILLS ARE NOT AVAILABLE. IN THIS STATEMENT, THE DEPONENT DID NOT AGREE THAT ANY EXPENDITURE ACTUALLY INCURRED WAS NOT RECORDED IN THE BOOKS OF ACCOUNT. THE ASSESSEE FILED HER RETURN OF UNDISC LOSED INCOME DECLARING NIL INCOME ON 10.4.02 WITHOUT DISCLOSING A NY AMOUNT AS HER UNDISCLOSED INCOME ON ACCOUNT OF ADMISSION M ADE BY HER HUSBAND IN HIS STATEMENT GIVEN ON 21.12.01 FOR THE REASON THAT THE STATEMENT WAS MADE BY HIM UNDER MISTAKEN BELIEF AND ERRONEOUS ASSUMPTION OF FACTS AS THE APPELLANT HAD MAINTAINED PROPER BOOKS OF ACCOUNT AN D ALL THE EXPENSES INCURRED IN CONSTRUCTION OF BOTH T HE PROPERTIES HAD DULY BEEN RECORDED IN THE BOOKS OF ACCOUNT MAINTAINED IN REGULAR COURSE OF BUSINESS. THESE BOOKS OF ACCOUNT WERE FOUND AT THE TIME OF SE ARCH AND HAVE BEEN SEIZED AS PER INVENTORY PREPARED AT S L. ITA NO.509 TO 511/VIZAG/2008 - CH. VIJAYA KUMARI, CH.RATNA KISHOREVJA PAGE 8 OF 12 NO.6, 7 AND 10 OF PAPER BOOK PAGE 446 FORMING PART OF THE PANCHANAMA PREPARED ON 21.11.01. THE ASSESSEE AGAIN CLARIFIED THE POSITION VIDE HER LETTER DATED 26.7.02, COPY PLACED AT PAPER BOOK PAGE 360-362. THE RELEVANT PO RTION IS REPRODUCED AS UNDER. 7.1 AFTER CONSIDERING THE FACTS PERTAINING TO T HE ISSUE OF ADMISSION, THE TRIBUNAL FINALLY GAVE ITS DECISION IN PARAGRAPH 22 AS UNDER: . WE, THEREFORE, ARE SATISFIED THAT THERE HAS BEEN A VALID RETRACTION MADE BY HIM OF THE STATEMENT GIVEN UNDER SECTION 132(4) OF THE ACT. THE HON'BLE HIGH COURT OF JUDICATURE AT ANDHRA PRADESH IN CIT VS. RAMDAS MOTO R TRANSPORT (238 ITR 177) AT PAGE 183 HAS HELD THAT M ERELY CONFESSIONAL STATEMENT WITHOUT THERE BEING ANY DOCU MENTARY PROOF SHALL NOT BE USED IN EVIDENCE AGAINST A PERSO N WHO MADE SUCH STATEMENT 23. THE SUPREME COURT IN PULLANGODE RUBBER PRODUCE CO. LTD VS. STATE OF KERALA (91 ITR 18, 21) HAS ALSO LAID T HE PRINCIPLE AS UNDER: AN ADMISSION IS AN EXTREMELY IMPORTANT PIECE OF EVIDENCE BUT IT CANNOT BE SAID THAT IT IS CONCLUSIV E. IT IS OPEN TO THE PERSON WHO MADE THE ADMISSION TO SHOW THAT I T IS INCORRECT. 24. THE PUNJAB & HARYANA HIGH COURT IN KRISHNAN LA L SHIV CHAND RAI VS. CIT (88 ITR 293 AT 297) HAS ALSO STAT ED AS UNDER: IT IS AN ESTABLISHED PRINCIPLE OF LAW THAT A PARTY IS ENTITLED TO SHOW AND PROVE THAT THE ADMISSION MADE BY HIM PREVIOUSLY IS IN FACT NOT CORRECT AND TRUE . 26. IN THE PRESENT CASE IN APPEAL, CH. RATNA KISHO RE IS FOUND TO HAVE SHOWN THAT THE ADMISSION MADE UNDER A MISTAKEN BELIEF AND THE RETRACTION IS FOUND TO HAVE BEEN MADE VALID LY, THE STATEMENT SO GIVEN COULD NOT BIND THESE TWO ASSESSE ES, WHO ARE APPELLANTS BEFORE US, SO AS TO USE THE SAME AGAINST THEM AS AN EVIDENCE FOR ASSESSMENT OF UNDISCLOSED INCOME OF BL OCK PERIOD. 7.2 THUS THE ADMISSION MADE IN THE SWORN STATEM ENT, WHICH WAS RELIED UPON BY BOTH THE TAX AUTHORITIES HAVE ALREADY BEEN HELD TO BE NOT BINDING ON THESE TWO ASSESSEES WITH THE OBSERVATION THAT A VALID RETRACTION HAS BEEN MADE. ITA NO.509 TO 511/VIZAG/2008 - CH. VIJAYA KUMARI, CH.RATNA KISHOREVJA PAGE 9 OF 12 8. WITH REGARD TO THE BOOKS OF ACCOUNTS MAINTAI NED BY THE ASSESSEE AND THE TWO ESTIMATES SEIZED DURING THE COURSE OF SEARC H, THE TRIBUNAL HAS GIVEN ITS FINDINGS AS UNDER: 27. NOW, THE ONLY ISSUE TO BE DECIDED IS WHETHER T HERE WAS ANY MATERIAL FOUND DURING THE COURSE OF SEARCH ON THE BASIS OF WHICH ADDITION COULD HAVE BEEN MADE IN THE COURSE OF BLOCK ASSESSMENT PROCEEDINGS IN THE CASE OF THESE ASSESSEES. AS A MATTER OF FACT, IT IS NOTICE D BY US THAT THERE WAS NO MATERIAL LIKE LOOSE SLIPS FOUND D URING THE COURSE OF SEARCH TO EVIDENCE ANY UNACCOUNTED CO ST OF CONSTRUCTION. WHATEVER COST IS INCURRED BY THE ASS ESSEE, THE SAME WAS RECORDED IN THE REGULAR BOOKS OF ACCOU NT MAINTAINED BY THEM AND NO PAPER WAS FOUND TO SUGGES T THAT THESE ASSESSEES HAVE INCURRED ANY EXPENDITURE ON CONSTRUCTION THAT IS NOT RECORDED IN THE SAID BOOKS OF ACCOUNT. THE ONLY MATERIAL THAT WAS FOUND DURING T HE COURSE OF SEARCH WERE THE ESTIMATES REGARDING THE PROBABLE COST OF CONSTRUCTION AND THE REPORTS OF VA LUERS APPOINTED BY THE BANK FOR ASSESSMENT OF THE MARKET VALUE OF THE PROPERTY. THEREFORE, IN OUR CONSIDERE D OPINION, THESE TWO DOCUMENTS CANNOT BE CONSIDERED A S DOCUMENTS EVIDENCING THE COST OF CONSTRUCTION INCUR RED BY THE APPELLANT. 9. THUS IT COULD BE SEEN THAT THE TRIBUNAL HAS A LREADY GIVEN ITS FINDING THAT THESE ASSESSEES HAVE MAINTAINED BOOKS OF ACCOU NT FOR THE CONSTRUCTION OF THE IMPUGNED BUILDINGS. THE SAID BOOKS OF ACCOU NT HAVE ALSO BEEN SEIZED DURING THE COURSE OF SEARCH. WITH REGARD TO THE DEFECTS IN MAINTENANCE OF BOOKS OF ACCOUNT, IT WAS NOTICED BY THE TRIBUNAL THAT THE ASSESSEE CH. RATNA KISHORE HAS ONLY DEPOSED THAT TH E ENTIRE EXPENDITURE WERE RECORDED THOUGH SOME OF THE BILLS ARE NOT AVAI LABLE. IT WAS FURTHER OBSERVED BY THE TRIBUNAL THAT THE DEPONENT DID NOT AGREE THAT ANY EXPENDITURE ACTUALLY INCURRED WAS NOT RECORDED IN T HE BOOKS OF ACCOUNT. THE TRIBUNAL HAS ALSO HELD THAT THE TWO REPORTS OF ESTIMATE FOUND DURING THE COURSE OF SEARCH, ON WHICH THE LEARNED CIT(A) H AD PLACED RELIANCE, CANNOT BE CONSIDERED AS DOCUMENTS EVIDENCING THE CO ST OF CONSTRUCTION INCURRED BY THE ASSESSEES. ITA NO.509 TO 511/VIZAG/2008 - CH. VIJAYA KUMARI, CH.RATNA KISHOREVJA PAGE 10 OF 12 9.1 THUS WITH REGARD TO THE FIRST TWO POINTS, O N WHICH BOTH THE TAX AUTHORITIES HAVE PLACED MUCH RELIANCE, THE TRIBUNAL HAS ALREADY GIVEN ITS DECISION. HENCE THE ACTION OF THE TAX AUTHORITIES IN PLACING RELIANCE AGAIN ON THOSE TWO POINTS IS A MISPLACED ONE AND NOT IN A CCORDANCE WITH THE LAW. 10. THE NEXT TWO POINTS RELATE TO THE REPORT OF DV O. THE ASSESSING OFFICER HAS TAKEN SUPPORT FROM SEC. 142A FOR ADOPTING THE R EPORT OBTAINED FROM THE DVO DURING THE COURSE OF BLOCK ASSESSMENT PROCE EDINGS. THE IMPLICATIONS OF SEC. 142A HAVE BEEN DISCUSSED IN DE TAIL BY THE AHMEDABAD BENCH OF ITAT IN THE CASE OF RAJHANS BUILDERS VS. D Y. CIT REPORTED IN (2010) 41 SOT 331. THE RELEVANT OBSERVATIONS ARE E XTRACTED BELOW: 11.FURTHER, IT IS MENTIONED IN THIS SECTION THAT W HERE ESTIMATE OF THE VALUE OF ANY INVESTMENT REFERRED TO IN SECTION 69 IS REQUIRED TO BE MADE. THIS ALSO SHOWS THAT A REFERENCE TO DVO UNDER SECTION 142A CAN BE MADE ONL Y WHEN A REQUIREMENT IS FELT BY THE ASSESSING OFFICER FOR MAKING SUCH REFERENCE. REQUIREMENT WOULD ARISE OR COULD BE FELT ONLY WHEN THERE IS SOME MATERIAL WITH THE A SSESSING OFFICER TO SHOW THAT WHATEVER ESTIMATE ASSESSEE HAS SHOWN IS NOT CORRECT OR NOT RELIABLE. THE USE OF WORD `R EQUIRE IS NOT SUPERFLUOUS BUT SIGNIFIES A DEFINITE MEANING WH EREBY SOME PRELIMINARY FORMATION OF MIND BY THE ASSESSING OFFICER IS NECESSARY WHICH REQUIRES HIM TO MAKE A R EFERENCE TO THE DVO UNDER SECTION 142A. 13. WE FURTHER FIND FROM THE CASE RECORDS THAT EVEN IF A REFERENCE UNDER SECTION 142A IS MADE BY THE ASSESSI NG OFFICER ON CERTAIN CONSIDERATION SUCH AS ANYTHING F OUND DURING THE COURSE OF SEARCH UNDER SECTION 132 OF TH E ACT OR ON THE BASIS OF A TAX EVASION PETITION OR A REFEREN CE IS REQUIRED TO BE MADE DURING THE COURSE OF OTHER PROC EEDINGS OR A REPORT OF THE DVO IS AVAILABLE TO THE ASSESSIN G OFFICER BEFORE MAKING AN ASSESSMENT OR REASSESSMENT THEN SA ME CAN BE UTILIZED ONLY IN ACCORDANCE WITH SUB-SECTION (3) OF SECTION 142A, I.E., THE ASSESSEE HAS TO BE GIVEN AN OPPORTUNITY OF BEING HEARD BEFORE SUCH A REPORT IS UTILIZED AND IN ACCORDANCE WITH SECTION 145 WHERE BOOKS OF A CCOUNT ARE REQUIRED TO BE REJECTED BY POINTING OUT SOME AP PARENT DEFECTS. IN OUR CONSIDERED VIEW, THE PROVISIONS OF SECTION 142A CANNOT BE READ IN ISOLATION TO SECTION 145. I N OTHER WORDS, IF BOOKS OF ACCOUNT ARE FOUND TO BE CORRECT AND COMPLETE IN ALL RESPECT AND NO DEFECT IS POINTED OU T THEREIN AND COST OF CONSTRUCTION OF BUILDING IS RECORDED TH EREIN, ITA NO.509 TO 511/VIZAG/2008 - CH. VIJAYA KUMARI, CH.RATNA KISHOREVJA PAGE 11 OF 12 THEN THE ADDITION ON ACCOUNT OF DIFFERENCE IN COST OF CONSTRUCTION COULD NOT BE MADE EVEN IF A REPORT IS OBTAINED WITHIN THE MEANING OF SECTION 142A FROM THE DVO. I T IS BECAUSE THE USE OF THE REPORT OF THE DVO OBTAINED U NDER SECTION 142A IS NOT MANDATORY BUT IS DISCRETIONARY AS THE WORD USED IS `MAY THEREIN. ACCORDINGLY, WE ARE OF THE CONSIDERED VIEW THAT IN THE PRESENT CASE WHEN ASSES SING OFFICER HAS NOT REJECTED THE BOOKS OF ACCOUNT BY PO INTING OUT ANY DEFECTS REFERENCE TO THE DVO WILL NOT BE VA LID AND, THEREFORE, DVOS REPORT COULD NOT BE UTILIZED FOR F RAMING ASSESSMENT EVEN IF SUCH A REPORT IS CONSIDERED TO B E OBTAINED UNDER SECTION 142A. SINCE REFERENCE TO DV O BEING HELD AS INVALID, THE ASSESSMENT/REASSESSMENT FRAMED THEREAFTER WOULD ALSO BE INVALID. 10.1 THUS IT CAN BE SEEN THAT IT IS THE SETTLED LE GAL PROPOSITION THAT A REFERENCE TO THE DVO CAN BE MADE ONLY WHEN BOOKS OF ACCOUNT ARE REJECTED BY POINTING THE DEFECTS THEREIN. IT IS ALS O HELD IN THE ABOVE CITED CASE THAT THE REPORT OF THE DVO OBTAINED UNDER SECT ION 142A IS NOT MANDATORY BUT IS DISCRETIONARY AS THE WORD USED IS MAY THEREIN. 11. IN THE INSTANT CASE, THOUGH THE BOOKS OF AC COUNT, WHEREIN THE CONSTRUCTION DETAILS HAVE BEEN RECORDED, WERE SEIZE D DURING THE COURSE OF SEARCH, YET NO ATTEMPT WAS MADE TO EXAMINE THOSE BOOKS. SIMILARLY NO ATTEMPT SEEMS TO HAVE BEEN MADE TO POINT OUT THE DEFECTS THEREIN AND REJECT THEM. INSTEAD, BOTH THE TAX AUTHORITIES HAVE PLACED MUCH RELIANCE TO THE OBSERVATIONS MADE IN THE BLOCK ASSE SSMENT ORDERS BY THEIR RESPECTIVE PREDECESSORS WITHOUT TAKING COGNIZ ANCE OF THE DECISIONS RENDERED BY THE TRIBUNAL ON THE VERY SAME ISSUES. 11.3 IN THESE CIRCUMSTANCES, WE ARE OF THE CONSI DERED VIEW THAT THE ACTION OF THE ASSESSING OFFICER IN UTILIZING THE DV OS REPORT FOR FRAMING THE ASSESSMENT, WITHOUT REJECTING THE BOOKS OF ACCO UNT IS NOT IN ACCORDANCE WITH THE LAW AND CONSEQUENTLY THE ADDITI ONS MADE ON THE BASIS OF THE SAID REPORT ARE LIABLE TO BE DELETED. WE ORDER ACCORDINGLY. THIS VIEW IS ALSO SUPPORTED BY THE LATEST DECISION OF HON'BLE S.C IN THE CASE OF SARGAM CINEMA V CIT REPORTED IN (2010) (328 ITR 513)(S.C). ITA NO.509 TO 511/VIZAG/2008 - CH. VIJAYA KUMARI, CH.RATNA KISHOREVJA PAGE 12 OF 12 12. SINCE WE HAVE DELETED THE ADDITIONS ON THE BASIS OF THE LEGAL ISSUE CITED ABOVE, WE FIND IT NOT NECESSARY TO ADDRESS TH E OTHER GROUNDS OF APPEAL URGED BY BOTH THE ASSESSEES. ACCORDINGLY WE DISMISS ALL OTHER GROUNDS. 13. IN THE RESULT, THE APPEALS FILED BY THESE ASSESS EES ARE PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 18 TH NOVEMBER, 2010. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, DATE: 18-11-2010 COPY TO 1 C. VIJAYA KUMARI, C/O C. SUBRAHMANYAM, CHARTERED ACCOUNTANT, 102, LAKSHMI APARTMENTS, FACOR LAYOUT, WALTAIR UPLANDS, VISAKHAPATNAM-530 003. 2 C. RATNA KISHORE, C/O C. SUBRAHMANYAM, CHARTERED ACCOUNTANT, 102, LAKSHMI APARTMENTS, FACOR LAYOUT, WALTAIR UPLANDS, VISAKHAPATNAM-530 003. 3 THE ACIT, CIRCLE-2(1), VIJAYAWADA 4 5 THE CIT, VIJAYAWADA THE CIT(A), VIJAYAWADA 6 THE DR, ITAT, VISAKHAPATNAM. 7 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM
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