Dr. Pratibha Sachan, Lucknow V. DY. Commissioner of Income Tax, Lucknow

ITA 707/LKW/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1139 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 06-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P K KAPOOR
• Keywords: Unexplained investment; Retrospective amendment; Fair market value; Valuation report

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B , LUCKNOW BEFORE SHRI. T.S. KAPOOR, ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER ITA NO. 707/LKW/2016 ASSESSMENT YEAR: 2012 - 13 DR. PRATIBHA SACHAN PROP. CNS HOSPITAL 20, TU LSI VIHAR COLONY NEAR SECTOR - 14, LUCKNOW V. DY. CIT RANGE I LUCKNOW T AN /PAN : AWEPS9679M (APP ELL ANT) (RESPONDENT) APPELLANT BY: SHRI. P. K. KAPOOR, C.A. RESPONDENT BY: SHRI RAJIV KUMAR, D.R. DATE OF HEARING: 07 02 201 8 DATE OF PRONOUNCEMENT: 09 0 2 201 8 O R D E R PER P ARTHA SARATHI CHAUDHURY, J.M : THIS APPEAL PREFERRED BY THE ASSESSEE EMANATES FROM THE ORDER OF THE LD. CIT(A) - 1, LUCKNOW DATED 19/8/2016. 2 . THE ASSESSEE HAS RAISED 11 GROUNDS OF APPEAL BEFORE US, HOWEVER, THE CRUX OF THE GRIEVANCE IS WITH REGARD TO UPHOLDING THE VALIDITY OF REFERENCE UNDER SECTION 142A OF THE ACT BY THE LD. CIT(A) AND CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFICER OF RS.81,61,800/ - . 3 . THE FACTS IN BRIEF RELATING TO THE CASE ARE THAT THE ASSESSEE PURCHASED A LAND B EARING NO.1983, VILLAGE BAHAR, T OWN AREA SATRIKH, PARGANA, SATRIKH DISTT, BARABANKI HAVING AREA OF 2.461 HECTARE FOR A CONSIDERATION OF RS.50 LAKHS AGAINST THE STAMP DUTY VALUATION OF RS.1,38,40,000/ - FROM SHRI KAJI SAMSUDDIN AHMED & SHRI KAJI SAIFUDDIN ITA NO.707/LKW/2016 PAGE 2 OF 8 AH MED S/O LATE SHRI KAJI KAMALUDDINI AHMED R/O MOHALLA KAJIYANA, KASBA & POST & PARGANA SATRIKH, TEHSIL NAWABGANJ, DISTRICT BARABANKI ON 3/6/2011. IN ORDER TO VERIFY THE PURCHASE CONSIDERATION OF THE LAND, AUTHORIZATION UNDER SECTION 142A(1) OF THE ACT WAS GIVEN TO THE DVO, KANPUR TO INSPECT THE LAND AND TO MAKE SUCH INVESTIGATION AND SEEK CLARIFICATIONS AND MATERIAL FROM THE ASSESSEE AND OTHER CONCERNED PERSON S AS ARE CONSIDERED NECESSARY AND TAKE SUCH MEASURES AS ARE DEEMED FIT TO DETERMINE THE TRUE AND CO RRECT FAIR MARKET VALUE OF THE SAID PROPERTY ON THE DATE OF TRANSFER OF PROPERTY I.E. ON 3/6/2011 I.E. FINANCIAL YEAR 2011 - 12 RELATING TO ASSESSMENT YEAR 2012 - 13. THE DVO OF THE DEPARTMENT HAS FURNISHED THE VALUATION REPORT AS UNDER: - NAME OF THE PROPERT Y DECLARED VALUE STAMP DUTY VALUATION ASSESSED VALUE AS ON LAND BEARING NO.RG NO.1983, AREA 2.461 HECTARE VILLAGE BAHAR, TOWN AREA SATRIKH, PARGANA SATRIKH, DISTT. BARABANKI 50,00,000 RS.1,38,40,000/ - RS.1,31,61,800/ - 03/06/2011 4 . THE ASSESSING OFFICE R ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE AND ON THE BASIS OF NOTICE, ASSESSEE SUBMITTED REPLY IN THE FORM OF VARIOUS OBJECTIONS, WHICH ACCORDING TO THE ASSESSING OFFICER W ERE NOT RELEVANT. THE ASSESSING OFFICER JUST STATED THAT THE OBJECTION RAISED BY T HE ASSESSEE IS AUTOMATICALLY COVERED BY THE CHANGING PROVISIONS OF SECTION 142A OF THE ACT . T HE MAIN CONTENTION OF THE ASSESSEE BEFORE THE ASSESSING OFFICER WAS THAT REFERENCE CANNOT BE ITA NO.707/LKW/2016 PAGE 3 OF 8 MADE TO THE DVO SINCE PROVISIONS OF SECTION 142A HAD COME INTO PICTUR E W.E.F. 1/10/2014 AND ASSESSEES CASE IS OF FINANCIAL YEAR 2011 - 12 RELEVANT TO THE ASSESSMENT YEAR 2012 - 13 AND PROVISIONS OF SECTION 142A WILL BE EFFECTIVE FROM FINANCIAL YEAR 2014 - 15 RELEVANT TO THE ASSESSMENT YEAR 2015 - 16 AND , THEREFORE , THE CASE OF THE ASSESSEE SHOULD NOT HAVE BEEN COVERED UNDER SECTION 142A OF THE ACT AND REFERENCE TO THE DVO IS NOT JUSTIFIABLE IN THE CASE OF THE ASSESSEE. THE ASSESSING OFFICER DID NOT FIND RELEVANCE WITH THE SUBMISSION OF THE ASSESSEE AND THE AMOUNT OF RS.1,31,61,800 / - AS VALUED BY THE DVO WAS TAKEN AS COST OF INVESTMENT AND THE DIFFERENCE AMOUNT OF RS.81,61,800/ - (RS.1,31,61,800 RS.50,00,000) WAS DISALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE. 5 . THE MATTER THEN TRAVELLED UPTO THE STAGE OF THE FIRST APPELLATE AUTH ORITY AND THE ASSESSEE ALSO SUBMITTED BEFORE THE LD. CIT(A) AN ELABORATE WRITTEN SUBMISSION, WHICH IS PART OF THE ORDER OF THE LD. CIT(A). THE BASIC HIGHLIGHTS OF THOSE SUBMISSIONS BEFORE THE LD. CIT(A) WE RE THAT THE CASE OF THE ASSESSEE BELONGS TO ASSESS MENT YEAR 2012 - 13 WHICH IS THE PERIOD PRIOR TO THE SUBSTITUTION OF SECTION 142A BY THE FINANCE (NO.2) ACT, 2014 W.E.F 1/ 1 0/2014 RELEVANT TO THE FINANCIAL YEAR 2014 - 15 AND ASSESSMENT YEAR 2015 - 16. THE ASSESSEE HAD PURCHASED AGRICULTURAL LAND ON 3/6/2011 I. E. IN FINANCIAL YEAR 2011 - 12 RELEVANT TO THE ASSESSMENT YEAR 2012 - 13 AND, THEREFORE, NO VALID REFERENCE UNDER SECTION 142A COULD BE MADE WITHOUT FIRST REJECTING THE BOOKS OF ACCOUNT. FROM A PERUSAL OF THE ASSESSMENT ORDER, IT IS CLEARLY EVIDEN T THAT THE A SSESSING OFFICER DID NOT REJECT THE BOOKS OF ACCOUNT OF THE ASSESSEE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS , ASSESSEE DULY PRODUCED BEFORE THE ASSESSING OFFICER THE BOOKS OF ACCOUNT ALONG WITH BILLS/VOUCHER S AND VARIOUS OTHER DOCUMENTS, WHICH WERE E XAMINED BY THE ASSESSING OFFICER AND COPIES THEREOF HAVE BEEN PLACED ON RECORD AS ITA NO.707/LKW/2016 PAGE 4 OF 8 HAS BEEN ADMITTED BY THE ASSESSING OFFICER AT PAGE 2 OF THE ASSESSMENT ORDER. 6 . THE ASSESSEE FURTHER PLACED RELIANCE UPON THE DECISION OF THE HON'BLE APEX COURT IN THE CASE O F CIT VS. VARTIC TOWNSHIP PVT. LTD REPORTED IN [2014] 367 ITR 466 (SC) WHEREIN IT IS HELD THAT LEGISLATIONS WHICH MODIFIED ACCRUED RIGHTS OR WHICH IMPOSE OBLIGATIONS OR IMPOSE NEW DUTIES OR ATTACH A NEW DISABILITY HAVE TO BE TREATED AS PROSPECTIVE UNLESS T HE LEGISLATIVE INTENT IS CLEARLY TO GIVE THE ENACTMENT A RETROSPECTIVE EFFECT. SINCE PROVISIONS OF SECTION 142A OF THE ACT WAS NOT THERE WHEN THE PURCHASE OF LAND HAD TAKEN PLACE ON 3/6/2011 AND SINCE SECTION 142A HAD COME INTO EFFECT FROM 1/10/2014 , WHIC H W AS ON A LATER DATE , THEREFORE , IT HAS TO BE APPLIED ONLY ON PROSPECTIVE BASIS AND CANNOT BE COVERED RETROSPECTIVELY TO INCLUDE THE TRANSACTION OF THE ASSESSEE HEREIN WHICH HAD TAKEN PLACE IN FINANCIAL YEAR 2011 - 12 RELEVANT TO THE ASSESSMENT YEAR 2012 - 13 . THE ASSESSEE ALSO PLACED RELIANCE ON THE HON'BLE APEX COURT IN THE CASE OF SARGAM CINEMA VS. CIT REPORTED IN [2010] 328 ITR 513 (SC) WHEREIN IT IS HELD REFERENCE MADE TO THE VALUATION OFFICE WITHOUT FIRST REJECTING THE BOOKS OF ACCOUNT WAS INVALID . THE SAME DECISION WAS FOLLOWED BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. LUCKNOW PUBLIC EDUCATIONAL SOCIETY WHICH WAS ALSO PLACED BEFORE THE LD. CIT(A). 7 . THE LD. CIT(A) , AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSME NT ORDER , HAS SIMPLY RE I TERATED THE FINDINGS RECORDED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER AND SUMMARILY DISPOSED OF THE APPEAL BY UPHOLDING THE ADDIT I ON MADE BY THE ASSESSING OFFICER. 8 . BEING FURTHER AGGRIEVED, ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. AT THE TIME OF HEARING BEFORE US, THE LD. A.R. OF THE ITA NO.707/LKW/2016 PAGE 5 OF 8 ASSESSEE REITERATED THE SUBMISSIONS AS MADE BEFORE THE SUBORDINATE AUTHORITIES AND VEHEMENTLY ARGUED THAT RULE OF LAW , WHICH HAS BEEN EVOL VED FROM TIME TO TIM E FROM VARIOUS JUDICI AL PRONOUNCEMENTS , IS CLEAR ON THE FACT THAT THE PROVISION S AMENDED TO BE APPLIED ON PROSPECTIVE BASIS ONLY UNLESS IT IS SPECIFICALLY MENTIONED THAT IT WILL HAVE RETROSPECTIVE APPLICATION. IN THE CASE OF THE ASSESSEE , THE TRANSACTION TOOK PLACE PRIOR TO S UBSTITUTION OF THE PROVISIONS OF SECTION 142A OF THE ACT AND HAS NO RETROSPECTIVE EFFECT , THEREFORE, REFERENCE MADE UNDER SECTION 142A IS NOT JUSTIFIED AND ACCORDINGLY THE ADDITION MADE ON THE BASIS OF SUCH REFERENCE SHOULD BE DELETED. 9 . THE LD. D.R., ON THE OTHER HAND, PLACED RELIANCE UPON THE ORDERS OF THE AUTHORITIES BELOW AND STATED THAT THE DVO H AS PROVIDED ONLY FAIR MARKET VALUE OF THE PROPERTY AND ANYONE WHO PURCHASES THE PROPERTY FIRST FINDS OUT WHAT IS THE FAIR MARKET VALUE AND THEREFORE REFERENCE MA DE TO THE DVO WAS JUSTIFIED IN THE CASE OF THE ASSESSEE. 10 . WE HAVE PERUSED THE CASE RECORDS, ANALYSED THE FACTS & CIRCUMSTANCES, HEARD THE RIVAL CONTENTIONS AND CONSIDERED THE JUDICIAL PRONOUNCEMENTS PLACED BEFORE US. WE FIND THAT SIMILAR ISSUE HAD COME UP FOR CONSIDERATION BEFORE THE ITA DELHI BENCH IN THE CASE OF WESTLAND BUILDTECH (P) LTD. VS. INCOME TAX OFFICER REPORTED IN [2016] 76 TAXMANN.COM 142 WHEREIN THE HON'BLE TRIBUNAL HAS HELD AS UNDER: - 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RE LEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE ONLY DISPUTE ON THIS ISSUE IS ABOUT THE INVESTMENT MADE BY THE ASSESSEE IN PURCHASE OF 11 PLOTS IN THE COURSE OF ITS BUSINESS. WHEREAS THE ASSESSEE WENT BY THE RATES GIVEN IN SALE DEEDS AS A PROPER MEASURE OF INVESTMENT MADE, THE AO ESTIMATED THE INVESTMENT MADE BY THE ASSESSEE ON THE BASIS OF THE DVO'S REPORT, WHICH VALUATION WAS PARTIALLY REDUCED BY THE ID. CIT (A). THE AO, IN MAKING THIS ITA NO.707/LKW/2016 PAGE 6 OF 8 ADDITION DID NOT REJECT THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSE SSEE AND STRAIGHTWAY WENT AHEAD IN MAKING THE ADDITION ON THE BASIS OF THE DVO'S REPORT. THE HON'BLE SUPREME COURT IN THE CASE OF SARGAM CINEMA V. CIT [2010] 328 ITR 513/[2 011 ] 197 TAXMAN 203 HAS HELD THAT WHERE THE BOOKS OF ACCOUNT ARE NOT REJECTED BY THE AO, NO REFERENCE CAN BE VALIDLY MADE TO THE DVO FOR MAKING AN ADDITION. THE RELIANCE OF THE ID. DR ON SOME CONTRARY JUDGMENT OF SOME NON - JURISDICTI6NAL HIGH COURT IS MISPLACED. IT IS OBVIOUS THAT WHEN AN ISSUE HAS BEEN DECIDED BY THE HON'BLE SUPREME COURT , NO LOWER COURT, MUCH LESS THE TRIBUNAL, CAN DISOBEY THE SAME. RELYING ON THE DIRECT JUDGMENT FROM THE HON'BLE SUMMIT COURT ON THIS ISSUE, THE ACTION TAKEN BY THE AO IN MAKING THE ADDITION ON THE BASIS OF THE DVO'S REPORT, WITHOUT FIRST REJECTING THE BOOK S OF ACCOUNT, CANNOT BE SUSTAINED. 5. THE ID. DR THEN CONTENDED THAT THE POSITION LAID DOWN BY THE HON'BLE SUPREME COURT IS NO MORE RELEVANT AFTER THE INSERTION OF SECTION 142A OF THE ACT. WE ARE NOT CONVINCED WITH THE SUBMISSION IN SO FAR AS THE EXTANT AS SESSMENT YEAR IS CONCERNED. IT IS RELEVANT TO NOTE THAT SUB - .SECTION (2) OF SECTION.142A AS INSERTED BY THE FINANCE (NO. 2) ACT, 2014, W.E.F. 1.10.2014 PROVIDES THAT : THE ASSESSING OFFICER MAY MAKE A REFERENCE TO THE VALUATION OFFICER UNDER SUB - SECTION (1 ) WHETHER OR NOT HE IS SATISFIED ABOUT THE CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE.' THERE WAS NO ANALOGOUS PROVISION PRIOR TO THIS INSERTION. THIS SHOWS THAT THE POSITION OF LAW LAID DOWN BY THE HON'BLE SUPREME COURT IN SARGAM CINEMA ( SUPRA) FOR NOT MAKING ANY ADDITION ON THE BASIS OF THE DVO'S REPORT WITHOUT FIRST REJECTING THE BOOKS OF ACCOUNT, IS VALID UP TO THE PERIOD PRIOR TO THE INSERTIO N OF SUB - SECTION (2). 11 . THERE ARE FEW FACTS EMERGED IN THIS CASE AND THEY ARE: - ( 1 ) T HAT THE ASSESSI NG OFFICER DID NOT REJECT THE BOOKS OF ACCOUNT. ITA NO.707/LKW/2016 PAGE 7 OF 8 ( 2 ) T HAT THE ASSESSING OFFICER MADE REFERENCE UNDER SECTION 142A OF THE ACT TO THE DVO WHICH ITSELF HAD COME INTO EFFECT ON 1/10/2014. ( 3 ) T HAT THE ASSESSEE HAD PURCHASED THE LAND ON 3/6/2011. 12 . IN THE CASE OF SARGAM C INEMA VS. CIT (SUPRA), THE HON'BLE SUPREME COURT HAS CATEGORICALLY HELD THAT BEFORE MAKING REFERENCE TO THE DVO FOR ESTIMATING THE COST OF INVESTMENT 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 REJECT 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 THE PROPERTY. THEREFORE, WE HAVE NO HESITATION IN HOLDIN G THAT THE REFERENCE MADE BY THE ASSESSING OFFICER TO THE DVO IS ILLEGAL, INVALID AND CANNOT 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 AN D MADE ADDITION, WHICH ARE TOTALLY UNSUSTAINABLE IN THE EYES OF LAW. MOREOVER, IN THE CASE OF THE ASSESSEE THE TRANSACTION TOOK PLACE PRIOR TO THE SUBSTITUTION OF THE PROVISIONS OF SECTION 142A OF THE ACT, WHICH HAS NO RETROSPECTIVE EFFECT, THEREFORE, REF ERENCE MADE UNDER SECTION 142A IS NOT JUSTIFIED. WE ACCORDINGLY DELETE THE ADDITION MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT IN THE PROPERTY BASED ON THE DVOS REPORT. 13 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 09 / 0 2 / 201 8 . SD/ - SD/ - [ T.S. KAPOOR ] [PARTHA SARATHI CHAUDHURY ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 9 TH FEBR UARY , 201 8 JJ: 0702 ITA NO.707/LKW/2016 PAGE 8 OF 8 COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR