V.R.Ramathilagam, Thirumangalam V. ITO, Madurai

ITA 61/CHNY/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8201 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 05-01-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 12-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A B KOLI; DEBENDRA NIKAR
• Assessee Lawyers: T BANUSEKAR
• Keywords: Reopening of assessment; Rejection of books of accounts; Value adopted by valuation officer; Principle of natural justice; Additional evidence; Valuation report; Reason to believe
• Section: 143(3); 147

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , B B ENCH, CHENNAI . , . , $ % BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G.PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A.NOS . 59 TO 62/MDS/2015 ( / ASSESSMENT YEARS: 2002-03 TO 2005-06) SMT. V.R.RAMATHILAGAM, LEGAL HEIR OF LATE V.S.RAMASAMY NAIDU, 12, GANDHIJI STREET, THIRUMANGALAM. VS INCOM0E TAX OFFICER, WARD-II(2), MADURAI. PAN:ACPPR9231B ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. T.BANUSEKAR, C.A. /RESPONDENT BY : MR. DEBENDRA NIKAR, CIT & MR. A.B.KOLI, JCIT /DATE OF HEARING : 5 TH JANUARY, 2016 /DATE OF PRONOUNCEMENT : 20 TH JANUARY, 2016 / O R D E R PER CHANDRA POOJARI, AM: THESE FOUR APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST DIFFERENT ORDERS OF THE COMMISSIONER OF I NCOME TAX (APPEALS)-I, MADURAI FOR THE ABOVE ASSESSMENT YEARS . SINCE THE ISSUES IN ALL THESE APPEALS ARE COMMON IN NATUR E, THESE APPEALS ARE CLUBBED, HEARD TOGETHER AND DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. FOR BREVITY, WE CONSIDER THE GROUNDS RAISED BY T HE ASSESSEE IN ITA NO.59/MDS/2015, WHICH ARE REPRODUCE D HEREIN BELOW:- 2 ITA NO.59 TO 62 /MDS/2015 1. FOR THAT THE COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO APPRECIATE THAT THE ORDER OF THE ASSESSING OFFIC ER IS WITHOUT JURISDICTION, IS CONTRARY TO LAW, FACTS AND CIRCUMSTANCES OF THE CASE AND IS OPPOSED TO THE PRI NCIPLES OF EQUITY, NATURAL JUSTICE AND FAIR PLAY. 2. FOR THAT THE COMMISSIONER OF INCOME TAX (APPEALS) F AILED TO APPRECIATE THAT ASSESSMENT IS VOID AB INITIO. 3. FOR THAT THE COMMISSIONER OF INCOME TAX (APPEALS) F AILED TO APPRECIATE THAT THE REOPENING WAS BAD IN LAW. 4. FOR THAT THE COMMISSIONER OF INCOME TAX (APPEALS) F AILED TO APPRECIATE THAT THE ASSESSING OFFICER DID NOT HA VE REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT. 5. FOR THAT THE COMMISSIONER OF INCOME TAX (APPEALS) F AILED TO APPRECIATE THAT THE NOTICE U/S.148 WAS ISSUED BE YOND FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR AND THERE WAS NO OMISSION OR FAILURE ON PART OF THE APP ELLANT AS ENVISAGED IN SECTION 147. 6. FOR THAT THE COMMISSIONER OF INCOME TAX (APPEALS ) FAILED TO APPRECIATE THAT THE . ASSESSING OFFICER OUGHT NO T TO HAVE RE-OPENED THE ASSESSMENT MERELY BASED ON VALUATION REPORT FROM DVO. 7. FOR THAT THE COMMISSIONER OF INCOME TAX (APPEALS) F AILED TO APPRECIATE THAT THE ACTUAL COST OF CONSTRUCTION HAS ALREADY BEEN RECORDED IN THE BOOKS OF ACCOUNT. 8. FOR THAT THE COMMISSIONER OF INCOME TAX (APPEALS) F AILED TO APPRECIATE THAT THE ASSESSING OFFICER OUGHT NOT TO HAVE REFERRED THE VALUATION OF THE IMMOVABLE PROPERTY TO THE VALUATION OFFICER WITHOUT REJECTING THE BOOKS. 9. FOR THAT, WITHOUT PREJUDICE TO THE ABOVE, THE COMMI SSIONER OF INCOME TAX (APPEALS) FAILED TO APPRECIATE THAT T HE ASSESSING OFFICER OUGHT TO HAVE ADOPTED THE STATE P WD RATES INSTEAD OF THE CPWD RATES IN ESTIMATING THE C OST OF CONSTRUCTION. 10. FOR THAT, WITHOUT PREJUDICE TO THE ABOVE, THE COMMI SSIONER OF INCOME TAX (APPEALS) FAILED TO APPRECIATE THAT T HE ASSESSING OFFICER OUGHT TO HAVE DEDUCTED COST TOWAR DS SELF SUPERVISION FROM THE ESTIMATED COST OF IMPUGNED BUI LDING. 11. FOR THAT THE COMMISSIONER OF INCOME TAX (APPEALS) F AILED TO APPRECIATE THAT SUFFICIENT OPPORTUNITY WAS NOT G RANTED BY 3 ITA NO.59 TO 62 /MDS/2015 THE ASSESSING OFFICER. 12. FOR THAT THE COMMISSIONER OF INCOME TAX (APPEALS) E RRED IN REJECTING THE ADDITIONAL EVIDENCE I.E. THE VALUA TION REPORT OF REGISTERED VALUER SUBMITTED BY THE APPELLANT DUR ING APPELLATE PROCEEDINGS. 3. BRIEF FACTS ARE THAT THE ASSESSEE LATE V.RAMASAM Y NAIDU WAS THE PROPRIETOR OF M/S. SRI MANIKANDAN VIL AS COFFEE, MEAL HOTEL, SRI ARUN PRASAD LODGE AND WAS DERIVING INCOME FROM FINANCE, WHO EXPIRED ON 2.8.2003. THE ASSESSEE WAS THE OWNER OF THE NEWLY CONSTRUCTED IMMOVABLE PROPERTY VSR RAMATHILAGAM MAHAL, NO.92, USILAI ROAD, THIRUMANGALAM POST, MADURAI DIST. AND AFTER HIS DEMISE, THE PROPERTY HAD BEEN TRANSFERRED TO SMT. V.R.RAMATHILAGAM BEING SPOUSE OF THE ASSESSEE. THE ASSESSMENTS IN RESPECT OF THE ASSESSMENT YEARS 2002 -03 & 2003-04 HAVE TO BE MADE IN THE HANDS OF LATE V.RAMA SAMY NAIDU AND REST OF THE ASSESSMENTS FOR THE ASSESSMEN T YEARS 2003-04 AND 2004-05 IN THE HANDS OF SMT. V.R.RAMATHILAGAM, WHICH IS ACCORDING TO THE ASSESSI NG OFFICER. WHILE COMPLETING THE ASSESSMENT UNDER SEC TION 143(3) OF THE ACT FOR THE ASSESSMENT YEAR 2005-06, NEWLY CONSTRUCTED IMMOVABLE PROPERTY VSR RAMATHILAGAM MA HAL 4 ITA NO.59 TO 62 /MDS/2015 WAS REFERRED TO DVO FOR VALUATION PURPOSE AND VALUA TION REPORT DATED 31.12.2008 WAS SUBMITTED TO THE ASSESS ING OFFICER. ON THAT BASIS, THE ASSESSING OFFICER CAME TO KNOW THAT ASSESSEE INCURRED COST OF CONSTRUCTION OF ` 1,49,80,000/- AND AS SUCH ACCORDING TO HIM, THERE WAS ESCAPEMENT OF INCOME FOR THE ASSESSMENT YEARS 2002-03 TO 2005-06. ACCORDINGLY, THE ASSESSING OFFICER RECORDED REASONS FOR REOPENING OF ASSESSMENTS AS MENTIONED BELOW:- THE PERIOD OF CONSTRUCTION OF PROPERTY WAS AUGUST 2001 TO JUNE, 2004 AND THE COST OF CONSTRUCTION WAS REPORTED AS ` 1,49,80,000/-. HENCE COST OF CONSTRUCTION HAS TO BE SPREAD OVER TO THE P ERIODS AS UNDER:- A.Y. INVESTMENT ESTIMATED ` INVST. ADMITTED IN RETURN OF INCOME ` INVESTMENT ESCAPED ` 2002-03 272355 X ` 1,49,80,000 7188475 5,67,558 2,72,355 2,95,203 2003-04 3,90,795 X ` 1,49,80,000 7188475 8,14,374 3,90,795 4,23,579 2004-05 3,37,733 X ` 1,49,80,000 7188475 7,03,798 3,37,733 3,66,065 2005-06 71,88,475 X ` 1,49,80,000 7188475 1,49,80,000 71,88,475 77,91,525 THE OWNER OF THE PROPERTY WAS LATE V.RAMASAMY NAIDU AND HE EXPIRED ON 2.8.2003. THE PROPERTY HAD BEEN TRANSFERRED TO S MT. V.R.RAMATHILAGAM BEING SPOUSE OF THE ASSESSEE. IN R ESPECT OF ASSESSMENT YEARS 2002-03 AND 2003-04, ASSESSMENTS H AVE TO BE MADE IN THE HANDS OF LATE V.RAMASAMY NAIDU AND THE REST OF THE ASSESSMENT YEARS 2003-04 AND 2004-05 ASSESSMENTS HA VE TO BE ASSESSED IN THE HANDS OF SMT. V.R.RAMATHILAGAM. 5 ITA NO.59 TO 62 /MDS/2015 ON VERIFICATION OF THE I.T. RECORDS OF ASSESSMENT Y EAR 2003-04 THE VALUE OF THE ABOVE SAID PROPERTY HAS ADMITTED TO ` 4,23,579/-. I HAVE REASON TO BELIEVE THAT INCOME TO THE TUNE OF ` 4,23,579/- HAS ESCAPED. ACCORDINGLY, ASSESSING OFFICER MADE ADDITION TOWARD S INCOME ON ACCOUNT OF INVESTMENT TOWARDS COST OF CON STRUCTION OF THE PROPERTY MENTIONED BELOW:- A.Y. INVESTMENT ESCAPED ` 2002-03 2,95,203 2003-04 4,23,579 2004-05 3,66,065 2005-06 77,91,525 4. THE ASSESSEE CARRIED ON APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) CHALLENGING T HE REOPENING OF ASSESSMENTS AND ALSO MERITS OF ADDITIO NS MADE BY THE ASSESSING OFFICER, WHO PARTLY ALLOWED THE AP PEALS AGAINST WHICH THE ASSESSEE IS IN APPEAL BEFORE US. 5. LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED THAT REFERENCE UNDER SECTION 142(A) TO DVO ITSELF IS BAD IN LAW AS IT WAS DONE WITHOUT REJECTION OF BOOKS OF ACCOUNTS OF THE ASSESSEE BY THE ASSESSING OFFICER. IN SUPPORT OF HI S CONTENTION, HE PLACED RELIANCE ON THE DECISION OF S UPREME COURT IN THE CASE OF SARGAM CINEMA VS. CIT (328 ITR 6 ITA NO.59 TO 62 /MDS/2015 513)(SC). EVEN OTHERWISE, ACCORDING TO HIM, THE ASSESSMENTS CANNOT BE REOPENED ON THE BASIS OF DVO REPORT WHICH WAS REFERRED TO BY THE ASSESSING OFFICER BEF ORE THE PENDENCY OF ANY PROCEEDINGS BEFORE HIM AND ON THE B ASIS OF DVO REPORT, ASSESSMENTS CANNOT BE REOPENED. FOR THI S PROPOSITION, HE RELIED ON THE JUDGEMENT OF THE SUPR EME COURT IN THE CASE OF ACIT VS. DHARIYA CONSTRUCTION COMPAN Y (328 ITR 515) (SC). 6. ON THE OTHER HAND, LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT UNDER SECTION 142(A), THE ASSESSING OFFICER CAN REFER THE MATTER TO THE DVO A ND REJECTION OF BOOKS OF ACCOUNTS IS NOT A PREREQUISIT E TO REFER THE MATTER TO DVO. FURTHER, HE SUBMITTED THAT THER E IS NO NEED TO RECORD ANY FINDING ON THE MATTER IN DISPUT E AS INTRODUCTION OF SECTION 142A WITH RETROSPECTIVE EFF ECT FROM 15.11.1972 VALIDATES THE REFERENCE BY THE ASSESSI NG OFFICER FOR VALUATION, NO MATTER WHETHER ASSESSMENT WAS PE NDING AT THE TIME OF REFERENCE TO DVO AND ON THE BASIS OF D VO REPORT, THE ASSESSING OFFICER IS EMPOWERED TO REOP EN THE ASSESSMENT. FOR THIS PROPOSITION, HE RELIED ON THE JUDGEMENT 7 ITA NO.59 TO 62 /MDS/2015 OF KERALA HIGH COURT IN THE CASE OF CIT VS. MRS. AC HAMMA CHACKO (326 ITR 258) (KER). 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIALS ON RECORD. WE HAVE CAREFULLY GONE THROUG H THE REASONS RECORDED BY THE ASSESSING OFFICER FOR REOPE NING OF ASSESSMENTS. AS RIGHTLY CONTENDED BY THE LEARNED A. R. REFERENCE MADE BY THE ASSESSING OFFICER UNDER SECTI ON 142A TO DVO ITSELF IS BAD IN LAW, AS IT WAS DONE WITHOUT REJECTING THE BOOKS OF ACCOUNTS OF THE ASSESSEE AS HELD BY SU PREME COURT IN THE CASE OF SARGAM CINEMA VS. CIT, CITED S UPRA, WHEREIN IT IS HELD AS UNDER:- IN THE PRESENT CASE, WE FIND THAT THE TRIBUNAL DECIDED THE MATTER RIGHTLY IN FAVOUR OF THE ASSESSEE IN AS MUCH AS THE TRIBUNAL CAME TO THE CONCLUSION THAT THE ASSESSING AUTHORITY COULD NOT HAVE REFERRED THE MATTER TO THE DVO WITHOUT THE BOOKS OF ACCOUNT BEING REJECTED. IN THE PRESENT CASE, A CATEGORICAL FINDING IS RECORDED BY THE TRIBUNAL THAT THE BOOKS WERE NEVER REJECTED. THIS ASPECT HAS NOT BEEN CONSIDERED BY THE HIGH COURT. IN THE CIRCUMSTANCES, RELIANCE PLACED ON THE REPORT OF THE DVO WAS MISCONCEIVED. 8. ACCORDING TO THE DEPARTMENTAL REPRESENTATIVE, T HE ASSESSING OFFICER APPLIED HIS MIND ON THE DVO REPOR T AND HE 8 ITA NO.59 TO 62 /MDS/2015 HAS SEGREGATED THE TOTAL COST FOR CONSTRUCTION OF P ROPERTY I.E. VSR RAMATHILAGAM MAHAL, NO.92, USILAI ROAD, THIRUMANGALAM POST, MADURAI DIST. FOR FOUR YEARS W HICH IS CONSCIOUS DECISION OF THE ASSESSING OFFICER AND IT IS NOT SOLELY BASED ON THE DVO REPORT AND IT CANNOT BE SAI D THAT DVO REPORT IS THE BASIS FOR REOPENING OF ASSESSMENT S. IN OUR OPINION, THE ARGUMENT OF LEARNED DEPARTMENTAL REPRESENTATIVE IS TOTALLY MISCONCEIVED. AS SEEN FRO M THE REASONS RECORDED BY THE ASSESSING OFFICER FOR REOPE NING, THE SOLE BASIS FOR REOPENING OF ASSESSMENTS IS NOTHING BUT VALUATION REPORT SUBMITTED BY THE DVO. HAD IT BEEN NO VALUATION REPORT FROM THE DVO, THE ASSESSING OFFICE R HAS NO BASIS FOR REOPENING OF ASSESSMENTS. THE ASSESSING O FFICER CAME TO KNOW THE AMOUNT OF INVESTMENT MADE BY THE ASSESSEE ON THE CONSTRUCTION OF BUILDING BECAUSE OF THE DVO REPORT. WE ARE, THEREFORE, OF THE OPINION THAT THE ISSUE RAISED BY THE ASSESSEE REGARDING REOPENING OF ASSESSMENTS IS SQUARELY COVERED BY THE JUDGEMENT OF THE SUPREME CO URT IN THE CASE OF ACIT VS. DHARIYA CONSTRUCTION COMPANY, CITED SUPRA, WHEREIN IT IS HELD AS UNDER:- 9 ITA NO.59 TO 62 /MDS/2015 'HAVING EXAMINED THE RECORD, WE FIND THAT IN THIS CASE, THE DEPARTMENT SOUGHT REOPENING OF THE ASSESSMENT BASED ON THE OPINION 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 SECTION 147 OF THE INCOME TAX ACT, 1961. THE ASSESSING OFFICER HAS TO APPLY HIS MIND TO THE INFORMATION, IF ANY, COLLECTED AND MUST FORM A BELIEF THEREON. IN THE CIRCUMSTANCES, THERE IS NO MERIT IN THE CIVIL APPEAL. THE DEPARTMENT WAS NOT ENTITLED TO REOPEN THE ASSESSMENT .. 9. IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF THE O PINION THAT REFERENCE MADE BY THE ASSESSING OFFICER UNDER SECTION 142A TO DVO ITSELF IS BAD IN LAW WITHOUT REJECTING THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND CONCLUDED ASSESSMEN TS CANNOT BE REOPENED ON THE BASIS OF VALUATION REPORT OF THE DVO. THUS, THE APPEALS OF THE ASSESSEE ARE TO BE AL LOWED ON LEGAL ISSUES ON THESE TWO GROUNDS. ACCORDINGLY, WE QUASH THE REASSESSMENT ORDERS. SINCE WE QUASHED THE REASSESSMENT ORDERS, AT THIS STAGE, IT IS NOT NECES SARY TO ADJUDICATE THE OTHER GROUNDS RAISED BY THE ASSESSE E INCLUDING THAT OF MERITS OF ADDITIONS MADE BY THE A SSESSING OFFICER. 10 ITA NO.59 TO 62 /MDS/2015 10. IN THE RESULT, ALL THESE APPEALS OF THE ASSESSE E ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH JANUARY, 2016 SD/- SD/- ( . ) ( & ) (G.PAVAN KUMAR) ( CHANDRA POOJARI ) ( * / JUDICIAL MEMBER * / ACCOUNTANT MEMBER ( /CHENNAI, , /DATED 20 TH JANUARY, 2016 SOMU ./ 0/ /COPY TO: 1. APPELLANT 2. RESPONDENT 3. 1 () /CIT(A) 4. 1 /CIT 5. / 6 /DR 6. /GF .