Income Tax Officer-4(4), Lucknow V. M/s M.A Builders Pvt. Ltd., Lucknow

ITA 738/LKW/2014

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 2007 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 14-08-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 22-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: H P SINGH
• Keywords: Value adopted by valuation officer; Business expenditure; Valuation report
• Section: 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCHES: B LUCKNOW BEFORE SHRI A.K. GARODIA, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDI CIAL MEMBER ITA NOS: 737,738/LKW/2014 ASSTT. YEAR S: - 2006-07, 2007-08 INCOME TAX OFFICER -4(4) VS. M/S. M.A. BUILD ERS PVT. LTD. LUCKNOW G-15, M UMTAZ MARKET, A MINABAD, LUCKNOW (APPELLANT) (RESPOND ENT) APPELLANT BY : SMT. ALKA SINGH, DR RESPONDENT BY : SHRI H.P. SINGH, ADVOCATE DATE OF HEARING : 14.8.2015 DATE OF PRONOUNCEMENT : 30.10.2015 O R D E R PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER THESE TWO APPEALS ARE FILED BY THE DEPARTM ENT AGAINST THE ORDERS DATED 25.06.2014 PASSED BY LD. CIT (A) - II, LUCKNOW FOR ASSESSMENT YEARS 2006-07 AND 2007-08. SINCE THE ISSUE INVOLVED IN BOTH THE APPEA LS IS COMMON, BOTH THE APPEALS ARE BEING DISPOSED OF TOGETHER BY THIS COMMON ORDER . 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY CARRYING OUT CONSTRUCTION CONTRACTS. THE ORIGINAL ASSESSMENTS FO R BOTH THE YEARS UNDER CONSIDERATION HAD BEEN COMPLETED U/S 143(1) OF THE INCOME TAX ACT, 1961. LATER ON, IT CAME TO THE KNOWLEDGE OF THE DEPARTMENT THAT THE ASSESSEE HAD CONSTRUCTED ITA NOS.737,738/LKW/ 2014 ITO VS. M/ S. M.A. BUILDERS PVT. LTD. 2 NEW MUMTAJ MARKET AT AMINABAD, LUCKNOW. REFERENCE U /S 142A OF THE INCOME TAX ACT WAS MADE TO THE VALUATION OFFICER FOR ESTIMATIN G YEAR WISE COST OF CONSTRUCTION OF THIS MARKET. THE ASSESSEE RAISED OBJECTIONS TO T HE VALUATION REPORT SUBMITTED BY THE DVO AND ALSO CHALLENGED THE ISSUANCE OF NOTICE U/S 148 BEFORE THE AO BUT THE AO DID NOT AGREE WITH THE CONTENTIONS OF THE ASSESS EE AND THE REASSESSMENT WAS FRAMED ON A TOTAL INCOME OF RS. 28,34,615/- AFTER M AKING AN ADDITION OF RS. 21,26,292/- FOR AY 2006-07 AND ON A TOTAL INCOME OF RS. 24,12,756/- AFTER MAKING AN ADDITION OF RS. 17,09,326/- FOR AY 2007-08 UNDER THE HEAD UN-EXPLAINED INVESTMENT U/S 69B OF THE INCOME TAX ACT, 1961. HO WEVER, IN FIRST APPELLATE PROCEEDINGS, THE LD. CIT (A), IN THE IMPUGNED ORDER , DELETED THE ADDITIONS BY OBSERVING IN PARA 8 OF HIS ORDER AS UNDER:- CONSIDERING WRITTEN SUBMISSIONS OF APPELLANT, FIND ING GIVEN BY ASSESSING OFFICER IN ASSESSMENT ORDER AND REMAND RE PORT, CASE LAW CITED BY APPELLANT, FACTS AND CIRCUMSTANCES OF THE CASE, I F IND THAT THE ASSESSING OFFICER HAS WRONGLY ASSUMED THE JURISDICTION U/S 14 7/148 OF ACT. THE AO HAS INITIATED PROCEEDINGS U/S 147 OF THE I.T. ACT FOR A LL THE FOUR ASSESSMENT YEARS I.E A.Y. 2005-06 TO 2008-09 ON SOLE BASIS OF VALUAT ION REPORT OF DVO. I HAVE EXAMINED THE ASSESSMENT ORDERS AND REASONS RECORDED FOR ISSUE OF NOTICE U/S 148 AND IT IS NOTICED THAT THE AO DID NOT APPLY HIS MIND IN ACCEPTING THE VALUATION REPORT AND HE TOTALLY IGNORED THE VALID O BJECTION RAISED BY APPELLANT AGAINST THE VALUATION OF PROPERTY AS MADE BY THE DV O. THE OBJECTIONS WERE VERY RELEVANT TO VALUATION OF ANY KIND OF INVESTMEN T / CONSTRUCTION EXPENSES. THE MAIN OBJECTIONS ARE ON DIFFERENCE IN TOTAL AREA TAKEN BY DVO AND ACTUAL INVESTMENT IN CONSTRUCTION BY APPELLANT, NON INSTAL LATION OF LIFT, NON CONSTRUCTION OF SEPTIC TANKS, INCLUSION OF HIGH RAT E OF QUALITY MATERIAL KOTA STONE AND MARBLE, DIFFERENCE IN CPWD RATE AND UPPWD RATE, DIFFERENCE IN SELF SUPERVISION CHARGES ALLOWED BY DVO AND 10% ALL OWABLE AS PER APPELLATE AUTHORITY. IF THE AO CONSIDERED THESE OBJECTIONS OF APPELLANT OBJECTIVELY THEN THERE WOULD BE NO EXCESS INVESTMENT EXPENSES INCURR ED IN COST OF CONSTRUCTION AS DETERMINED BY DVO AND ACCEPTED BY A O WITHOUT APPLICATION OF MIND. THE VALUATION REPORT AND VALUE ASCERTAINED BY DVO IS NOT BINDING ON AO. THE AO COULD HAVE OVERLOOKED THE VALUE DETERMIN ED BY DVO IS FACT WARRANT. BUT IN PRESENT CASE THE AO DID NOT DO SO. AS ALREADY HELD THE REFERENCE MADE BY AO U/S 142A OF I.T. ACT WAS NOT PROPER AND VALID. THEREFORE ON THE BASIS OF SUCH INVALID DVO REPORT I NITIATION OF PROCEEDINGS U/S 147 OF I.T. ACT AND ISSUANCE OF NOTICE U/S 148 CANN OT BE SAID TO BE JUSTIFIED. ITA NOS.737,738/LKW/ 2014 ITO VS. M/ S. M.A. BUILDERS PVT. LTD. 3 RELIANCE IS PLACED ON THE DECISION OF M/S. MAHASHAY CHUNILAL VS. DCIT & OTHERS IN WPC NO. 7514 OF 2010 DATED 5 TH FEBRUARY ,2014 267 CTR 334 2014 WHEREIN IT WAS HELD FOR THE REPORT OF VALUAT ION OFFICER TO BECOME A BASIS FOR THE REOPENING , THE ASSESSING OFFICER SHO ULD HAVE APPLIED HIS MIND TO THE REPORT OF THE VALUATION OFFICER. IN VIEW OF TH E ABOVE, WE ARE OF THE CONSIDERED OPINION THAT THE AO HAS MERELY INTENDED TO REVISIT THE SAID CONCLUDED ASSESSMENT AND IT IS A CLEAR CASE OF CHAN GE OF OPINION, WHICH IS NOT PERMISSIBLE IN LAW. 3. IN THE APPEAL BEFORE US, THE LD. DR SUBMIT TED THAT THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS THAT THE REFERENCE U/S 142A TO THE DVO WAS NOT PROPER AND VALID. HE SUBMITTED THAT THE DVO IS A TECHNICAL PER SON APPOINTED BY THE GOVT. OF INDIA FOR THE PURPOSE OF MAKING VALUATION AND AS SU CH HIS REPORT CANNOT BE IGNORED EVEN BY THE AO. HE SUBMITTED THAT THE REASSESSMENT ORDERS PASSED BY THE AO SHOULD BE RESTORED. 4. LD. AR, ON THE OTHER HAND, SUBMITTED THAT THE REOPENING U/S 148 WAS NOT VALID AS IT WAS ENTIRELY BASED ON THE VALUATION REP ORT OF THE DVO. HE ALSO SUBMITTED THAT SECTION 142A OF THE INCOME TAX ACT DOES NOT CO VER CASES OF BUSINESS EXPENDITURE AND SINCE THE ASSESSEE IS A BUILDER, IT S CASE IS OUTSIDE THE PURVIEW OF SECTION 142A. THE LD. AR PLEADED THAT THE ORDER OF THE LD. CIT (A) SHOULD BE UPHELD. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE ALSO GONE THROUGH THE RECORDS. PAGE 1 OF THE ASSESSMENT ORDERS FOR BOTH T HE YEARS CONTAINS THE REASONS FOR REOPENING OF THE ASSESSMENT. IT IS SEEN THAT IT IS MENTIONED BY THE AO THAT THE INITIAL ASSESSMENT WAS COMPLETED U/S 143(1) OF THE INCOME TAX ACT AND WHEN IT CAME TO THE KNOWLEDGE OF THE AO THAT THE ASSESSEE H AD CONSTRUCTED NEW MUMTAZ MARKET, AMINABAD, LUCKNOW AND AS THE ASSESSEE HAD N OT PRODUCED ALL VOUCHERS, A ITA NOS.737,738/LKW/ 2014 ITO VS. M/ S. M.A. BUILDERS PVT. LTD. 4 REFERENCE WAS MADE TO THE DVO U/S 142A OF THE INCOM E TAX ACT, 1961 FOR ESTIMATING YEAR WISE COST OF CONSTRUCTION. THE ASSE SSMENT ORDERS FURTHER MENTION THAT THE VALUATION OFFICER HAD SUBMITTED HIS REPORT IN WHICH THE YEAR WISE COST OF CONSTRUCTION HAD BEEN BIFURCATED AND AFTER CONSIDER ING THE YEAR WISE INVESTMENT, THE DIFFERENCE HAD BEEN WORKED OUT AND ACCORDINGLY THE NOTICE U/S 148 OF THE INCOME TAX ACT HAD BEEN ISSUED AND SERVED UPON THE ASSESSE E. THUS, IT IS SEEN THAT THE NOTICES U/S 148 FOR BOTH THE YEARS HAVE BEEN ISSUED ENTIRELY ON THE BASIS OF THE REPORT SUBMITTED BY THE DVO AND THE AO HAS NOT APPL IED HIS MIND IN REACHING A SATISFACTION FOR THE PURPOSE OF ASSUMING JURISDICTI ON U/S 147 / 148 OF THE ACT. LD. CIT (A) HAS ALSO GIVEN A CATEGORICAL FINDING IN PARA 10 OF BOTH HIS ORDERS THAT THE AO DID NOT BRING ANY MATERIAL ON RECORD TO SHOW AS TO HOW THE BOOKS OF ACCOUNTS AND BILLS AND VOUCHERS WERE NOT IN CONFORMITY WITH THE INVEST MENT AS ESTIMATED BY THE DVO. THE LD. CIT (A) HAS ALSO GIVEN A FINDING THAT THE A O HAS NOT POINTED OUT ANY DEFECTS IN THE MAINTENANCE OF BOOKS OF ACCOUNTS, ENTRIES MA DE IN THE ASSESSEES BOOKS OF ACCOUNTS AND IN BILLS AND VOUCHERS. THUS, IN OUR CO NSIDERED OPINION, ON THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE AO HAS ONLY RELIED ON THE VALUATION MADE BY THE DVO FOR THE PURPOSE OF INITIATING REASSESSME NT PROCEEDINGS WHICH IS AGAINST THE SETTLED LAW. RELIANCE IS PLACED ON THE DECISIO N OF HONBLE APEX COURT IN THE CASE OF ACIT VS. DHARIYA CONSTRUCTION REPORTED IN ( 2010) 328 ITR 515 (SC) HAS HELD THAT OPINION GIVEN BY THE DVO PER SE IS NOT INFORMA TION FOR THE PURPOSE OF REOPENING ASSESSMENT U/S 147 OF THE INCOME TAX ACT. THE HONB LE APEX COURT HELD THAT THE AO HAS TO APPLY HIS MIND TO THE INFORMATION, IF ANY, C OLLECTED AND MUST FORM A BELIEF THEREON. THUS, WE ARE OF THE OPINION THAT THE AO WA S NOT JUSTIFIED IN ISSUING NOTICES U/S 148 OF THE INCOME TAX ACT AND THEREFORE ON THE FACTS OF THE CASE AND ITA NOS.737,738/LKW/ 2014 ITO VS. M/ S. M.A. BUILDERS PVT. LTD. 5 RESPECTFULLY FOLLOWING THE HONBLE APEX COURT IN TH E CASE OF ACIT VS. DHARIYA CONSTRUCTION (SUPRA) WE HOLD THE ACTION OF THE AO I N ISSUING THE NOTICE U/S 148 OF THE ACT AS VOID AND AGAINST THE PROVISIONS OF INCOM E TAX LAW. WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT (A). 6. IN THE RESULT BOTH THE APPEALS OF THE DEPA RTMENT ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH OCTOBER, 2015. SD/- SD/- (A.K. GARODIA) (SUDHAN SHU SRIVASTAVA ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: THE 30 TH OCTOBER. 2015 VEENA COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GUARD FILE BY ORDER DY. REGISTRAR SL. NO. DESCRIPTION DATE 1. DATE OF DICTATION BY THE AUTHOR 21.10.2015 2. DRAFT PLACED BEFORE THE DICTATING MEMBER 21.10 .2015 3. DRAFT PLACED BEFORE THE SECOND MEMBER 4. DRAFT APPROVED BY THE SECOND MEMBER 5. DATE OF APPROVED ORDER COMES TO THE SR. PS 6. DATE OF PRONOUNCEMENT OF ORDER ITA NOS.737,738/LKW/ 2014 ITO VS. M/ S. M.A. BUILDERS PVT. LTD. 6 7. DATE OF FILE SENT TO THE BENCH CLERK 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER