Srikakolapu Chalapathi Rao, Suryapet, Hyderabad V. ITO, Ward-1, Suryapet, Suryapet

ITA 71/HYD/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 2652 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 08-08-2018
• Assessment Year: 2009-2010
• Appeal Filed On: 11-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M H NAIK
• Assessee Lawyers: S RAMA RAO
• Keywords: Unexplained investment; Valuation report; Reason to believe; Reassessment proceedings
• Section: 143(3); 147; 148; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NOS. 70 & 71/HYD/2017 ASSESSMENT YEARS: 2008 - 09 & 2009 - 10 SRIKAKOLAPU CHALAPATHI RAO, SURYAPET. PAN: AAPHS 1190 E VS. ITO, WARD - 1, SURYAPET. (APPELLANT) (RESPONDENT) ASSESSEE BY: SRI S. RAMA RAO REVENUE BY: SRI M.H. NAIK, DR DATE OF HEARING: 08.08.2018 DATE OF PRONOUNCEMENT: 17 TH AUGUST, 2018 ORDER PER INTURI RAMA RAO, A.M.: THESE TWO APPEALS ARE FILED BY THE ASSESSEE DIRECTED AGAINST THE COMMON ORDER OF THE LEARNED CIT(A) - 3, HYDERABAD, DATED 05.10.2016 FOR THE ASSESSMENT YEARS 2008 - 09 AND 2009 - 10. SINCE THE COMMON ISSUE IS INVOLVED IN BOTH THE APPEALS, HEARD TOGETHER AND DISPOSE OF BY THIS COMMON ORDER. FOR THE SAKE OF BREVITY AND CONVENIENCE, THE FACTS RELEVANT TO THE A.Y. 2008 - 09 IN ITA NO.70/H/2018 ARE STATED HEREIN. 2. THE APPELLANT RAISED THE FOLLOWING GROUNDS OF APPAL AND ADDITIONAL GROUNDS: - 1. THE ORDER OF THE LD. CIT(A) IS ERRONEOUS TO THE EXTENT IT IS PREJUDICIAL TO THE APPELLANT. 2 2. THE LD. CIT(A) ER RED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN INITIATING PROCEEDINGS U/S 147 OF THE ACT WHEN NO FRESH INFORMATION IS AVAILABLE ON RECORD. 3. THE LD. CIT(A) ERRED IN CONFIRMING THE TOTAL COST OF CONSTRUCTION OF THE BUILDING AT RS. 1,70,82,583/ - A ND CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFICER OF RS. 33,39464/ - U/S 69 OF THE ACT. ADDITIONAL GROUNDS OF APPEAL : - 1. THE LD. CIT(A) OUGHT TO HAVE HELD THAT REFERENCE TO THE VALUATION CELL U/S 142A OF THE ACT IS NOT VALIDLY MADE. 2. 2. THE LD. CIT(A) OUGHT TO HAVE CONSIDERED THE FACT THAT THE ASSESSING OFFICER DID NOT REJECT THE BOOKS OF ACCOUNT BEFORE RESORTING TO ESTIMATING THE COST OF CONSTRUCTION AND ADOPTING THE ESTIMATED VALUE AS THE COST OF CONSTRUCTION. 3. BRIEF FACTS OF THE CASE ARE THAT THE APPELLANT IS AN INDIVIDUAL DERIVING INCOME FROM HOUSE PROPERTY. RETURN OF INCOME FOR THE A.Y. 2008 - 09 WAS FILED ON 31.03.2009 DECLARING INCOME OF RS. 1,05,652/ - . T HE SAID RETURN OF INCOME W AS ACCEPTED UNDER THE PROVISIONS OF SECTION 143(1) OF THE ACT. S UBSEQUENTLY, A NOTICE U/S 148 WAS ISSUED ON 18.0 3.2015 IN RESPONSE TO WHICH IT WAS SUBMITTED THAT THE ORIGINAL RETURN FILED ON 31.03.2009 BE TREATED AS RETURN IN RESPONSE TO NOTICE U/S 148 OF THE ACT. SUBSEQUENTLY, THE ASSESSMENT WAS COMPLETED U/S 143(3) R.W.S 147 OF THE ACT VIDE ORDER DATED 17.12.2015 AT A TOTAL INCOME OF RS. 34,45,116/ - . THE DISPARITY BETWEEN THE RETURN ED INCOME AND ASSESSED INCOME WAS ON ACCOUNT OF ADDITION MADE U/S 69 OF THE ACT AS UNEXPLAINED INVESTMENT IN CONSTRUCTION OF A COMMERCIA L BUILDING IN S.NO.228, WARD NO.1, BLOCK NO.6, H.NO.1 - 6 - 141/10/A3 & A4 OF BACHIRAG MADHARA VILLAGE, SURYAPET , B ASED ON THE VALUATION REPORT GIVEN BY VALUATION CELL OF I.T. DEPARTMENT U/S 142A(1) OF THE ACT . T HE FACTS SET OUT BY THE ASSESSING OFFICER L EADS TO THE ADDITION ARE AS UNDER: - UNEXPLAINED INVESTMENT IN CONSTRUCTION OF BUILDING: - THE ASSESSEE CONSTRUCTED A COMMERCIAL BUILDING IN SY. NO.228, WARD NO.1, BLOCK NO.6, H.NO.1 - 6 - 141/10/A3 & A4 OF BACHIRAG MADHA RA VILLAGE WITHIN MUNICIPAL LIMITS OF SURYAPET TOWN ON A LAND OF 2420 SQUARE YARDS. THE TOTAL BUILT UP AREA OF THE BUILDING IS 44,500 SQ. FT AND THE ASSESSEE CLAIMS THAT HE HAS STARTED THE CONSTRUCTION OF THIS BUILDING IN THE FINANCIAL YEAR 2006 - 07 3 AND COMPLETED THE CONSTRUCTION IN THE FINANC IAL YEAR 2008 - 2009 SPENDING A TOTAL AMOUNT OF RS. 1,15,00,000/ - . THIS YEAR WISE BREAKUP OF THE AMOUNTS CLAIMED TO HAVE SPENT BY THE ASSESSEE ARE AS UNDER: - FINANCIAL YEAR AMOUNT IN RS. 2006 - 07 2,21,191/ - 2007 - 08 68,79,224/ - 2008 - 09 43,99,585/ - TOTAL 1,15,00,000/ - DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS FOR THE A.Y. 2012 - 13, TO DETERMINE THE CORRECT OF COST OF THE BUILDING, A REFERENCE U/S 142A(1) OF THE INCOME TAX ACT, 1961WAS MADE TO THE EXECUTIVE ENGINEER, VALUATION CELL, INCOME TAX DEPARTMENT, HYDERABAD ON 10.12.2014. THE EXECUTIVE ENGINEER VIDE VALUATION REPORT NO. 11:02:2014 DT: 23.02.2015 DETERMINED THE COST OF CONSTRUCTION OF THIS BUILDING AT RS.2,10,92,000/ - . FINANCIAL YEAR COST AS PER ASSESSEE COST AS PER VALUATION REPORT DIF FERENCE 2006 - 07 2,21,191 4,07,075/ - 1,85,884/ - 2007 - 08 68,79,224/ - 1,26,17,234/ - 57,38,010/ - 2008 - 09 43,99,585/ - 80,67,690/ - 36,68,105/ - TOTAL 1,15,00,000/ - 2,10,92,000/ - 95,92,000/ - 4. BEING AGGRIEVED, AN APPEAL WAS PREFERRED BEFORE THE CIT(A) CHALLENGING THE VERY VALIDITY OF THE REFERENCE MADE U/S 142 A OF THE ACT AND THE REOPENING OF THE ASSESSMENT U/S 147 OF THE ACT . O N THE MERITS OF ADDITION , IT WAS CONTENDED THE VALUATION OFFICER OUGHT NOT TO HAVE ADOPTED THE CPWD RATES INSTEAD OF STATE PWD RATES AND THE METHOD FOR VALUATION OF COST OF CONSTRUCTION WAS ADOPTED EVEN THOUGH THE DETAILED INFORMATION REGARDING THE ESTIMATION OF COST OF CONSTRUCTION IS AVAILABLE . LD. CIT(A) AFTER CONSIDERING THE DETAILED SUBMISSIONS MADE ON BEHALF OF THE APPELL ANT HAD CONFIRMED THE ACTION OF THE ASSESSING OFFICER. HOWEVER, GRANTED RELIEF OF 15% TOWARDS RATE DIFFERENCE. BEING AGGRIEVED, THE APPELLANT IS IN APPEAL BEFORE US. 5. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE VERY REFERENCE MADE TO THE VALUA TION OFFICER U/S 142A OF THE ACT IS NOT VALID IN LAW , INASMUCH AS , THERE ARE NO PENDING PROCEEDINGS AS ON THE DATE OF REFERENCE TO THE VALUATION OFFICER . R ELIANCE IN THIS REGARD WAS PLACED 4 ON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF M E & MUMMY HOSPITAL VS. ACIT (45 TAXMANN.COM 248). HE ALSO SUBMITTED THAT THERE ARE NO REASONS TO BELIEVE THAT INCOME GOT ESCAPED ASSESSMENT AS THE VALUATION REPORT PER SE CANNOT BE THE BASIS TO FORM OPINION AS TO THE INCOME ESCAPED ASSESSMENT , IN THIS REGARD RELIANCE WAS PLACED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. DHARIYA CONSTRUCTION CO (328 ITR 515) AND IN THE CASE OF SARGAM CINEMA VS. CIT (328 ITR 513). 6. ON THE OTHER HAND, LEARNED DEPARTMENTAL REPRESENTATIVE PLACED RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. I N THE PRESENT APPEAL , THE ISSUE IS WHETHER THERE IS A VALID REFERENCE U/S 142A TO THE VALUATION OFFICER FOR ESTIMATING COST OF CONSTRUCTION OF THE COMMERCIAL BUILDING AT BACHIRAG MADHARA VILLAGE, SURYAPET WHETHER THERE IS A REASON TO BELIEVE THAT INCOME GOT ESCAPED ASSESSMENT SO AS TO ENABLE THE ASSESSING OFFICER TO ISSUE A NOTICE U/S 148 OF THE ACT. IN THE PRESENT CASE, THE F ACTS AS BORNE OUT OF THE ASSESSMENT ORDER ARE THAT THE REASSESSMENT PROCEEDINGS WERE INITIATED BY ISSUE OF NOTICE U/S 148 OF THE ACT ON 18.03.2015 , WHEREAS AS STATED IN THE ASSESSMENT ORDER, REFERENCE U/S 142A OF THE ACT WAS MADE TO THE VALUATION CELL OF T HE INCOME TAX DEPARTMENT ON 10.12.2014 , ON WHICH DATE , APPARENTLY THERE WERE NO PENDING ASSESSMENT PROCEEDINGS . T HE VALUATION OFFICER SUBMITTED THE REPORT ESTIMATING THE COST OF CONSTRUCTION OF BUILDING AT RS. 2,10,92,000/ - ON 23.02.201 5 . BASED ON THIS R EPORT, THE ASSESSING OFFICER HAD ISSUED NOTICE U/S 148 OF THE ACT ON 18.03.2015. THUS, IT IS CLEAR FROM THE ABOVE FACTS THAT AS ON THE DATE OF REFERENCE TO THE VALUATION OFFICER U/S 142A OF THE ACT, THERE WE RE NO PENDING PROCEEDINGS. THEN THE ISSUE THAT COMES UP FOR CONSIDERATION 5 IS WHETHER THE REFERENCE TO VALUATION CELL U/S 142A CAN BE MADE FOR THE PURPOSE OF INITIATING REASSESSMENT PROCEEDINGS. THE HONBLE GUJARAT HIGH COURT HAD DEALT WITH THIS ISSUE IN THE CASE OF ME & MUMMY HOSPITAL VS. ACIT (SUPRA) VIDE PARA 16 OF THEIR ORDER WHICH READS AS UNDER: 16. THE VALUER'S REPORT UNDER SECTION 142A OF THE ACT IS FOR THE PURPOSE OF ESTIMATING VALUE OF SUCH INVESTMENT REFERRED TO IN SECTION 69 OR SECTION 69B OR THE VALUE OF ANY BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE REFERRED TO IN SECTION 69A OR SECTION 69B OF THE ACT. UNLESS, THEREFORE, THERE IS PRIMA FACIE APPLICATION OF SECT IONS 69, 69A AND 69B OF THE ACT, REFERENCE TO THE VALUER IS SIMPLY NOT PERMISSIBLE. IT IS ONLY WHEN THERE IS SOME MATERIAL BEFORE THE ASSESSING OFFICER TO HOLD THAT IN CASE OF AN ASSESSEE FALLS UNDER SECTIONS 69, 69A AND 69B AS THE CASE MAY BE, THAT HE CAN , TO ESTIMATE THE VALUE OF SUCH UNEXPLAINED INVESTMENT OR EXPENDITURE IN BULLION, JEWELLERY ETC., CALL FOR THE REPORT OF THE VALUER. INITIAL STARTING POINT FOR TRIGGERING A REFERENCE TO THE VALUER, THEREFORE, HAS TO BE INVOCATION OF SECTIONS 69,69A OR 69B OF THE ACT. IT IS ONLY WHEN ANY OF THESE PROVISIONS COME INTO PLAY THAT THE ASSESSING OFFICER CAN RESORT TO SECTION 142A FOR ESTIMATING THE VALUE OF SUCH INVESTMENT OR EXPENDITURE. SEQUENCE CANNOT BE PUT IN THE REVERSE. IN OTHER WORDS, THE ASSESSING OFFICE R WOULD HAVE NO AUTHORITY TO CALL FOR THE REPORT OF THE VALUER UNDER SECTION 142A TO JUDGE WHETHER THERE HAS BEEN ANY UNEXPLAINED INVESTMENT OR EXPENDITURE AS REFERRED TO IN SECTIONS 69, 69A AND 69B OF THE ACT. IT WOULD ONLY AMOUNT TO FISHING INQUIRY AND N OT INVESTIGATION UNDER SECTION 142A OF THE ACT. IN OUR OPINION, THE SCHEME OF THE PROVISIONS WHEN READ HARMONIOUSLY WOULD LEAD TO A SITUATION WHERE IN CASE THE ASSESSING OFFICER, DURING THE PENDENCY OF ASSESSMENT OR REASSESSMENT, IS OF THE OPINION THAT SEC TIONS 69, 69A AND 69B OF THE ACT CAN BE INVOKED; IN ORDER TO ESTIMATE SUCH UNEXPLAINED INVESTMENT OR EXPENDITURE IN ACQUISITION OF BULLION, JEWELLERY OR VALUABLE ARTICLE, HE CAN RESORT TO VALUATION BY THE VALUATION OFFICER IN TERMS OF SUB - SECTION (1) OF SE CTION 142A OF THE ACT. IN THE PRESENT CASE, NO SUCH MATERIAL EMERGES FROM THE RECORD. TO THE CONTRARY, NEITHER FROM THE ORDER OF REFERENCE NOR FROM ANY OTHER MATERIAL, THE RESPONDENT COULD POINT OUT THAT THE ASSESSING OFFICER HAD INVOKED THE PROVISIONS OF SECTIONS 69,69A OR 69B OF THE ACT AND IN THE PROCESS DESIRED TO OBTAIN THE ESTIMATE OF UNEXPLAINED INVESTMENT OR EXPENDITURE AND FOR WHICH PURPOSE DVO'S REPORT WAS CALLED. HE SIMPLY GAVE NO REASONS IN THE ORDER. NO INDEPENDENT REASONS, EITHER FLOWING FROM THE FILE OR EVEN IN THE FORM OF AN AFFIDAVIT ASSUMING THE SAME WOULD BE PERMISSIBLE, ARE BROUGHT TO OUR NOTICE. THUS QUITE APART FROM THE PETITIONER'S GRIEVANCE THAT THE ASSESSING OFFICER MERELY ACTED UNDER THE DIRECTIVES OF THE SUPERIOR AND DID NOT, ON HI S OWN APPLICATION OF MIND, DESIRE TO CALL FOR THE REPORT, IN ABSENCE OF ANY VALID REASONS FOR MAKING A REFERENCE, IN OUR OPINION, THE ORDER MUST FAIL. T HE RATIO LAID DOWN IN THE ABOVE CASE IS THAT , IN THE ABSENCE OF ANY PENDING PROCEEDINGS THE VERY REFER ENCE TO THE VALUATION CELL IS BAD IN 6 LAW . THE SUBMISSION OF THE LEARNED DEPARTMENTAL REPRESENTATIVE THAT THE REFERENCE WAS MADE DURING THE COURSE OF PENDING PROCEEDINGS FOR THE AYS 2012 - 13 AND 2013 - 14 AND THEREFORE, IT CAN BE TREATED AS PENDING PROCEEDING S FOR THE AYS 2008 - 09 AND 2009 - 10 CANNOT BE ACCEPTED, ESPECIALLY IN THE LIGHT OF THE FACT THAT THERE WAS NO EXPENDITURE INCURRED ON THE CONSTRUCTION OF THE COMMERCIAL PROJECT DURING THE AYS 2012 - 13 AND 2013 - 14. FURTHER, RELEVANT CRITERIA TO RESORT TO THE PROVISIONS OF SECTION 142A IS THE SATISFACTION OF THE ASSESSING OFFICER THAT THE PROVISIONS OF SECTION 69 OF THE ACT ARE TRIGGERED. IN THE ABSENCE OF PENDING PROCEEDINGS FOR THE RELEVANT ASSESSMENT YEAR, THE QUESTION OF REACHING SATISFACTION AS TO A PPLICABILITY OF SECTION 69 DOES NOT ARISE. THERE WAS NO WHISPER IN THE ASSESSMENT ORDER AS TO SUCH SATISFACTION REACHED BY THE ASSESSING OFFICER. THEREFORE, THE RATIO LAID DOWN BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF ME & MUMMY HOSPITAL VS. ACIT (SUPRA) IS SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT CASE. R ESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE HONBLE GUJARAT HIGH COURT (SUPRA) , WE ALLOW THE GROUNDS OF APPEAL IN THIS REGARD AND THE REFERENCE TO VALUATION CELL U/S 142A IS HEREBY QUA SHED . W E CONSIDER IT NOT NECESSARY TO DEAL WITH THE OTHER ASPECTS OF REOPENING OF THE ASSESSMENT AS WE QUASHED THE ASSESSMENT ORDER FOR THE A.Y. 2008 - 09 ON THE VERY VALIDITY OF REFERENCE . ACCORDINGLY, WE ALLOW THE GROUNDS RAISED BY THE ASSESSEE. 8. IN T HE RESULT, ASSESSEES APPEAL IS ALLOWED. ITA NO.71/HYD/2017 9. SINCE THE IDENTICAL ISSUE IS INVOLVED IN THE APPEAL FOR THE ASSESSMENT YEAR 2009 - 10, FOR THE PARITY OF THE REASONING GIVEN WHILE DEALING WITH THE ASSESSEES APPEAL FOR THE A.Y. 2008 - 09 IN THE ABOVE PARAS OF THIS ORDER, THE ASSESSMENT MADE FOR THE A.Y. 2009 - 10 IS HEREBY 7 QUASHED. ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE FOR THE A.Y. 2009 - 10 ARE ALLOWED. 10. IN THE RESULT, BOTH THE APPEALS FILED BY THE A SSESSEE ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON 17TH AUGUST, 2018 . SD / - SD/ - (P. MADHAVI DEVI) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED: AUGUST, 2018 OKK COPY TO: - 1) SRI S. RAMA RAO, ADVOCATE, FLAT NO.102, SHRIYAS ELEGANCE, 3 - 6 - 643, STREET NO.9, HIMAYAT NAGAR, HYDERABAD - 500029. 2) INCOME TAX OFFICER, WARD - 1, KRISHNA NAGAR, COLONY, SURYAPET. 3) THE CIT(A) - 3, HYDERABAD 4) THE PR. CIT - 3, HYDERABAD 5) THE DR, ITAT, HYDERABAD 6) GUARD FILE