MOHAN LAL AGARWAL, Jaipur V. ACIT, Jaipur

ITA 866/JPR/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5349 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 18-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJ MEHRA JCIT DHK
• Assessee Lawyers: S C JAIN
• Keywords: Value adopted by valuation officer; Business income; Difference of opinion; Valuation report; Assessment record; Change of opinion; Reassessment proceedings
• Section: 143(3); 142(1); 147; 69; 148

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH FOE FLAG ;KN O] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI VIKRAM SINGH YA DAV, AM VK;DJ VIHY LA-@ ITA NO.866/JP/13 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2006-07 SHRI MOHANLAL AGARWAL PROP. M/S MOHAN GEMS , 1269, KHOWWALON KA CHOWK, GOPALJI KA RASTA, JAIPUR CUKE VS. THE ACIT, CIRCLE-1, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. ABSPA 0120 C VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI S.C. JAIN (C.A.) JKTLO DH VKSJ LS@ REVENUE BY : SHRI RAJ MEHRA (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 25.02.2016 ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 18/03/2016. VKNS'K@ ORDER PER SHRI VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD CIT(A)-I, JAIPUR DATED 23.09.2013 WHEREIN THE ASSES SEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL: 1. THAT THE LD. CIT(A), BIKANER HAD ERRED AT LAW AS WE LL AS ON FACTS IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER OF I NITIATING PROCEEDINGS U/S 148 OF THE IT ACT. 2. THAT THE LD. CIT(A), BIKANER HAD ERRED AT LAW AS W ELL AS ON FACTS IN CONFIRMING THE ADDITION OF RS. 11,29,828/- MADE BY THE AO U/S 69 ON THE BASIS OF THE VALUATION REPORT OF DVO AS PER ORD ER PASSED U/S 143(3) READ WITH SECTION 148 OF THE ACT. ITA NO/ 866/JP/13 SHRI MOHANLAL AGARWAL, JAIPUR VS. THE ACIT, CIRCLE -1, JAIPUR 2 2. THE ASSESSEE APPELLANT DURING THE PREVIOUS YEAR CARRIED OUT THE ACTIVITIES OF CONSTRUCTING RESIDENTIAL APARTMENTS ON THE PIECE OF LAND LOCATED AT D-192/A, MOTI MARG, BAPU NAGAR, JAIPUR AND THEREAFTER SALE O F THESE APARTMENTS. THE ASSESSEE HAD TAKEN UP THE WOK OF CONSTRUCTION O F MULTI-STORY APARTMENT ON A PIECE OF LAND AT D-192/A, MOTI MARG, BAPU NAGA R, JAIPUR DURING THIS YEAR AND PART OF THE APARTMENTS CONSTRUCTED IN THE BUILD ING WERE SOLD IN THE A.Y. 2007-08 OF WHICH PROFIT WAS ASSESSED IN A.Y. 07-08. BALANCE UNSOLD APARTMENTS WERE LYING IN STOCK. THE AO WHILE COMPL ETING THE ASSESSMENT FOR THE A.Y 07-08 REFERRED THIS BUILDING TO THE VALUATI ON CELL AND THE VALUATION OFFICER AS PER REPORT NO. 158 DATED 17.12.2009 HAS WORKED OUT THE VALUATION OF LAND AND BUILDING. THIS VALUATION WAS CONSIDERED B Y THE AO AS REASON FOR INITIATING PROCEEDINGS U/S 148 FOR THE SUBJECT A.Y. 2006-07. THE VALUE DECLARED BY THE ASSESSEE FOR THE BUILDING UNDER CONSTRUCTION FOR THE ASSESSMENT YEAR 2006-07 IN THE BALANCE SHEET WAS OF RS. 23,52,516/- WHEREAS THE VALUE ASSESSED BY THE DVO WAS AT RS. 34,32,044/ - WHICH WAS RESULTING INTO A DIFFERENCE IN THE VALUE BY RS.11,29,828/- AND FOR THIS DIFFERENCE AMOUNT OF RS. 11,29,828/-, THE AO PROCEEDED TO COMPLETE THE A SSESSMENT U/S 147 AS PER REASONS RECORDED ON 26.03.2010. 2.1 THE LD. AR SUBMITTED THAT THE AO IN RECORDING O F REASONS U/S 147 HAD INDICATED THAT THE ASSESSMENT COMPLETED U/S 143(3) IS TO BE RE-OPENED FOR THE REASON OF DIFFERENCE IN THE VALUE OF CONSTRUCTION A S INDICATED IN THE VALUATION REPORT OF THE DEPARTMENTAL VALUATION OFFICER AND AS DISCLOSED BY THE ASSESSEE. THE VALUATION REPORT DOES NOT PROVIDE ANY INFORMATI ON TO RE-OPEN THE COMPLETED ASSESSMENT MADE U/S 143(3) AS PER PROVISI ONS OF SECTION 148 OF THE ACT AS BEING HELD BY THE VARIOUS HIGH COURTS IN THE FOLLOWING CASES: A) PRAKASH CHAND VS. DIT AND OTHERS (2004) 269 ITR 260 (MP) B) GIRDHAR GOPAL GULATI VS. UOI (2004) 269 ITR 45 ( ALL.) C) CIT VS. SMT. MEENA DEVI MANSINGHKA(2008)203 ITR 351 D) ITO VS. SANATOSH KTR. DALMIA (1994) 2008 ITR 337 (CAL.) E) SARDAR KEHAR SINGH VS. CIT & ORS. (1992) 195 ITR 769 (RAJ.) F) ACIT VS. DHARIA CONSTRUCTIONS COMPANY (2010) 32 8 ITR 515 (SC). ITA NO/ 866/JP/13 SHRI MOHANLAL AGARWAL, JAIPUR VS. THE ACIT, CIRCLE -1, JAIPUR 3 IN THE AFORESAID CASES BEFORE THE HIGH COURTS AND T HE HONBLE APEX COURT IN THE CASE OF DHARIA CONSTRUCTION COMPANY HAVE TAKEN THE VIEW OPINION OF THE DVO IS NOT THE INFORMATION FOR THE PURPOSE OF RE-OP ENING THE ASSESSMENT U/S 147 OF THE IT ACT. THE ASSESSING OFFICER HAS TO APP LY HIS MIND TO THE INFORMATION, IF ANY COLLECTED, AND MUST FORM THE BE LIEF THEREON, RE-ASSESSMENT WOULD NOT BE JUSTIFIED AS THE PROCEEDINGS ARE INVAL ID AD INITIO. THE ITAT JODHPUR BENCH IN THE CASE OF ITO VS. SHIV SHAKTI BUILDHOME PVT. LTD. (2011) 141 TTJ 123 HAD ALSO CONQUERED THAT THE REOP ENING ON THE BASIS OF VALUATION OFFICER REPORT OF THE COMPLETED ASSESSMEN T IS INVALID. THE AUTHORITIES BELOW BEING ACIT, CIRCLE-1, JAIPUR AND THE CIT(APPEALS), HAVE NOT GIVEN ANY FINDINGS WHY THE REFERENCE GIVEN OF T HE VARIOUS COURT CASES IN THE OBJECTION LETTER FILED BEFORE THE A.O. AND IN T HE WRITTEN SUBMISSIONS FILED BEFORE THE CIT(APPEAL) ARE NOT APPLICABLE IN THE CA SE OF ASSESSEE WHEREAS ALL THE CASE LAWS WHICH WERE REFERRED TO WERE DIRECTLY HAVING THE IMPACT ON THE PROCEEDINGS OF THE ASSESSEE, BUT WITHOUT GIVING ANY REASONS THE SAME WERE NOT CONSIDERED OR IGNORED. THE CIT(APPEALS) HAD ALSO NOT PLACED ANY FINDING ON THE VARIOUS CASE LAWS REFERRED TO IN THE SUB MISSIONS FILED AS APPEARING ON PAGE NO.6 OF SUBMISSION AS WELL AS THE APEX COURT JUDGEMENT OF DHARIA CONST RUCTION COMPANY REFERRED TO BY FILING THE COPY OF THE ORDER AS PER PAGE NO.7 OF THE SUBMISSION AND THEREFORE THE BORDER OF THE AUTHORITIES BELOW ARE B ASED UPON SURMISES AND PRESUMPTION AND IS AGAINST THE LEGAL INTENT OF THE PROVISIONS OF THE ACT. ITA NO/ 866/JP/13 SHRI MOHANLAL AGARWAL, JAIPUR VS. THE ACIT, CIRCLE -1, JAIPUR 4 IT IS THEREFORE, PRAYED BEFORE THE BENCH THAT THE P ROCEEDINGS INITIATED U/S 148 AFTER RECORDING OF REASONS U/S 147 ARE NOT THE VALI D PROCEEDINGS SINCE THE SAME WERE BASED UPON THE DVO REPORT AND BY FORMING THE B ELIEF ON SUCH REPORT WHICH IS IN THE NATURE OF CHANGE OF OPINION AND THE REFORE, SUCH PROCEEDINGS ARE NOT MAINTAINABLE AND THE ORDER SO PASSED DESERV ES TO BE QUASHED. LD AR FURTHER SUBMITTED THAT THE ADDITION HAS BEEN MADE U/S 69 OF THE IT ACT WHEREAS THE BUILDING WAS FORMING PART OF STOCK IN T RADE OF THE ASSESSEE AS OUT OF TOTAL 9 FLATS CONSTRUCTED, 7 FLATS WERE SOLD DUR ING THE ASSESSMENT YEAR 2007- 08 AND THE PROFIT WAS TAXED AS BUSINESS INCOME BY T HE AO AS PER ORDER PASSED U/S 143(3) OF THE ACT. THIS FACT OF CONSTRUCTION O F 9 FLATS IS APPEARING IN THE REASONS RECORDED IN PARA 2 AND ACCORDINGLY ADDITION WAS IN THE NATURE TRADING ADDITIONS AND NOT AS AN ADDITION U/S 69 OF THE IT A CT. 3. THE LD DR IS HEARD WHO HAVE VEHEMENTLY ARGUED TH E MATTER AND RELIED ON THE ORDER OF LOWER AUTHORITIES. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. FIRSTLY, THE LD. AR HAS CHALLENGED THE I NITIATION OF REASSESSMENT PROCEEDINGS ON THE GROUND OF CHANGE IN OPINION. IT WOULD THEREFORE, BE RELEVANT TO EXAMINE THE REASONS RECORDED BY THE AO FOR INITIATING THE REASSESSMENT PROCEEDINGS AND SECONDLY, WHETHER THE SAME TANTAMOUNT TO CHANGE OF OPINION ON PART OF THE AO. 4.1 THE REASONS RECORDED BY THE AO U/S 147 OF THE A CT READS AS UNDER: IN THIS CASE, THE ASSESSEE HAS FILED RETURN OF INC OME DECLARING NET INCOME OF RS. 4,34,272/- ON 30.10.2006. THE ASSESSMENT U/S 14 3(3) WAS COMPLETED ON 29.12.2008 ON TOTAL INCOME OF RS. 8,02,820/-. ITA NO/ 866/JP/13 SHRI MOHANLAL AGARWAL, JAIPUR VS. THE ACIT, CIRCLE -1, JAIPUR 5 DURING THE ASSESSMENT PROCEEDINGS, THE AO HAS NOTIC ED THAT THE ASSESSEE HAS CONSTRUCTED NINE FLATS/APARTMENTS AT BAPU NAGAR, JA IPUR. DURING THE ASSESSMENT PROCEEDINGS, THE ASSSSEE FAILED TO PRODU CE BILLS/VOUCHERS FOR EXPENSES INCURRED BY HIM FOR CONSTRUCTION OF FLATS. THEREFORE, THE AO HAS MADE A REFERENCE TO VALUATION OFFICER U/W 142(1) OF THE INCOME TAX ACT, 1961 TO ASCERTAIN THE ACTUAL INVESTMENT IN CONSTRUCTION OF FLATS VIDE LETTER NO. ITO/WD- 1/JPR/06-07/1196 DATED 22.12.2008. THE VALUATION O FFICER HAS SUBMITTED HIS REPORT VIDE HIS OFFICE LETTER NO. VO(VAL.)/ITD/JPR/ 2009/IT-8/158 DATED 17.12.2009. THE VALUATION OFFICER HAS ESTIMATED IN VESTMENT DURING THE YEAR UNDER CONSIDERATION AT RS. 34,32,044/- AS AGAINST I NVESTMENT OF RS. 23,02.216/- DECLARED BY THE ASSESSEE. THUS, THERE IS A DIFFERE NCE OF RS. 11,29,828/-. IT IS THEREFORE CLEAR THAT DURING THE YEAR UNDER CONSIDER ATION, THE ASSESESEE HAS MADE UNDISCLOSED INVESTMENT OF RS. 11,29,828/- IN C ONSTRUCTION OF FLATS. IN VIEW OF THE ABOVE FACTS, I AM OF THE OPINION THAT INCOME TO THE TUNE OF RS. 11,29,828/- HAS ESCAPED ASSESSMENT WITHIN MEANING O F SECTION 147 OF THE IT ACT, 1961. NECESSARY PERMISSION MAY KINDLY BE ACCO RDED TO ISSUE NOTICE U/S 148 OF THE IT ACT, 1961. 4.2 IN THE CONTEXT OF CONSTRUCTION OF NINE FLATS/AP ARTMENTS AT BAPU NAGAR, JAIPUR AND THE AMOUNT OF INVESTMENT MADE BY THE ASS ESSEE, FROM THE PERUSAL OF THE ASSESSMENT ORDER, WE FIND THAT THERE IS NO D ISCUSSION OR ANY OBSERVATION MADE BY THE AO. IN THIS REGARD THE LD. AR SUBMITTE D THAT SPECIFIC QUERIES WERE RAISED BY THE AO DURING THE COURSE OF ASSESSMENT PR OCEEDINGS AND THE ASSESSEE HAS FILED ITS RESPONSES AND THE AO HAVING BEEN SATISFIED WITH SUCH SUBMISSIONS AND EXPLANATION OFFERED HAS NOT GIVEN A NY FINDING IN THE ASSESSMENT ORDER. IN THIS REGARD, LD AR DRAWN OUR ATTENTION TO LETTER DATED 10.12.2008 FILED BEFORE THE ITO DURING THE COURSE O F ASSESSMENT PROCEEDINGS WHEREIN RESPONSES OF QUERIES RAISED BY THE AO IN R ELATION TO THE BOOKING OF FLATS AND THE CONSTRUCTION COST HAS BEEN SUBMITTED. 4.3 THE RELEVANT PARAS OF ASSESSEES SUBMISSION DAT ED 10.12.2008 (APB 1-6) ARE REPRODUCED AS UNDER:- 4. A QUERY WAS RAISED THAT WHETHER THE AMOUNT TAKE N AGAINST THE BOOKING OF THE FLATS WAS AS PER AGREEMENT. IN THIS CONNECT ION WE WISH TO STATE THAT NO ITA NO/ 866/JP/13 SHRI MOHANLAL AGARWAL, JAIPUR VS. THE ACIT, CIRCLE -1, JAIPUR 6 WRITTEN AGREEMENT WAS CARRIED OUT BY THE ASSESSEE W ITH THE PERSON WHO HAD GIVEN THE ADVANCE BUT IN THE REGISTERED SALE DEED R EFERENCE OF THE PAYMENT AND CHEQUE PAYMENTS MADE BY THEM IS APPEARING. YOUR GOO DSELF WILL APPRECIATE THAT ALL THE FLATS WERE SOLD OUT BY THE ASSESSEE IN THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2007-08 AND THE DETAILS OF SUCH SAL ES HAVE ALREADY BEEN FILED WITH OUR SUBMISSION DATED 21.11.2008. 5. IT WAS ASKED TO EXPLAIN THE RATE PER SQ.FT. WHEN THE APARTMENTS WERE BOOKED AND THE COST PER SQUARE FT. OF CONSTRUCTION . IN THIS CONNECTION PLEASE TAKE REFERENCE OF OUR SUBMISSION DATED 21.11.2008 A S PER PARA-1 IN WHICH IT HAS BEEN SPECIFIED THAT THE TOTAL COST OF CONSTRUCTION WAS RS. 40 LACS FOR THE AREA CONSTRUCTED IN THE BUILDING OF ABOUT7900 SQ.FT. TH E AVERAGE COST OF CONSTRUCTION WORK OUT TO BE BETWEEN RS. 450-500 SQ.FT. EXCLUDING THE VALUE OF LAND. THE TOTAL SALE WAS IN RESPECT OF 8 FLATS AGAINST SALE CONSIDERATION OF RS. 75.50 LACS. THE AREA SOLD OUT WAS ABOUT 7000 SQ.FT AND AVERAGE SALE PRICE INCLUDING THE VALUE OF LAND WORKS OUT TO BETWEEN RS. 1050 1100 PER SQ.FT. ALLOCATION OF COST OF LAND ON THE TOTAL CONSTRUCTED AREA OF 7900 SQ.FT. WORK OUT TO RS. 480/- PER SQ.FT. 6. THE PROFIT DERIVED BY SALES OF 8 APARTMENTS OUT OF THE TOTAL 9 APARTMENTS WAS OF RS. 5,52,284/- WHICH WAS SHOWN AS PROFIT IN THE RETURN OF INCOME FILED FOR ASSESSMENT YEAR 2007-08. THE PROFIT AGAINST SA LE REVENUE IS ABOUT 7.32%. 4.4 IN LIGHT OF ABOVE, IT IS CLEAR THAT SPECIFIC QU ERIES WERE RAISED BY THE AO REGARDING CONSTRUCTION OF FLATS, BOOKING OF FLATS, COST OF CONSTRUCTION ETC AND THE ASSESSEE HAS SUBMITTED ITS RESPONSES. EVEN THO UGH THE ASSESSMENT ORDER IS SILENT PRESUMABLY, THE AO SEEMS TO BE SPECIFIED WITH THE ASSESSEES SUBMISSION AND HAS NOT PROCEEDED FURTHER AND HAS NO T MADE ANY ADDITION IN THE HANDS OF THE ASSESSEE. IT IS THEREFORE CLEAR T HAT THE SUBJECT MATTER IN RESPECT OF WHICH THE REASONS FOR REOPENING THE ASSE SSMENT PROCEEDINGS WERE RECORDED HAVE BEEN EXAMINED EARLIER DURING THE COUR SE OF ORIGINAL ASSESSMENT PROCEEDINGS AND THE AO DID NOT FIND ANY GROUND OR R EASON TO MAKE ADDITION OR REJECT THE STAND OF THE ASSESSEE. HE THUS FORMS AN OPINION. 4.5 HAVING SAID THAT, IT IS NOTED THAT THE ASSESSME NT PROCEEDINGS IS SOUGHT TO BE REOPENED BASED ON THE DVOS REPORT. THE DVO REP ORT HAS BEEN OBTAINED BY THE AO SUBSEQUENT TO THE CLOSE OF THE ORIGINAL A SSESSMENT PROCEEDINGS AND ITA NO/ 866/JP/13 SHRI MOHANLAL AGARWAL, JAIPUR VS. THE ACIT, CIRCLE -1, JAIPUR 7 PASSING OF ASSESSMENT ORDER U/S 143(3) OF THE ACT A ND IS A FRESH PIECE OF INFORMATION WHICH WAS NOT AVAILABLE AT THE TIME OF ORIGINAL ASSESSMENT PROCEEDINGS. THE QUESTION THAT ARISES IS WHERE THE NEW INFORMATION COMES TO THE KNOWLEDGE OF THE AO, WOULD THE PRINCIPLE OF CHA NGE OF OPINION CONTINUE TO APPLY. IN THIS REGARD, WE REFER TO FULL BENCH DECI SION OF DELHI HIGH COURT IN CASE OF USHA INTERNATIONAL [2012] 25 TAXMANN.COM 200 (DELHI ) (FB) WHERE THE HIGH COURT HAS OBSERVED AS UNDER: 16. HERE WE MUST DRAW A DISTINCTION BETWEEN ERRONE OUS APPLICATION/INTERPRETATION/UNDERSTANDING OF LAW AND CASES WHERE FRESH OR NEW FACTUAL INFORMATION COMES TO THE KNOWLEDGE OF THE A SSESSING OFFICER SUBSEQUENT TO THE PASSING OF THE ASSESSMENT ORDER. IF NEW FACTS, MATERIAL OR INFORMATION COMES TO THE KNOWLEDGE OF THE ASSESSING OFFICER, WHICH WAS NOT ON RECORD AND AVAILABLE AT THE TIME OF THE ASSESSMENT ORDER, THE PRINCIPLE OF 'CHANGE OF OPINION' WILL NOT APPLY. THE REASON IS T HAT 'OPINION' IS FORMED ON FACTS. 'OPINION' FORMED OR BASED ON WRONG AND INCOR RECT FACTS OR WHICH ARE BELIED AND UNTRUE DO NOT GET PROTECTION AND COVER U NDER THE PRINCIPLE OF 'CHANGE OF OPINION'. FACTUAL INFORMATION OR MATERIA L WHICH WAS INCORRECT OR WAS NOT AVAILABLE WITH THE ASSESSING OFFICER AT THE TIME OF ORIGINAL ASSESSMENT WOULD JUSTIFY INITIATION OF REASSESSMENT PROCEEDING S. THE REQUIREMENT IN SUCH CASES IS THAT THE INFORMATION OR MATERIAL AVAILABLE SHOULD RELATE TO MATERIAL FACTS. THE EXPRESSION 'MATERIAL FACTS' MEANS THOSE FACTS WHICH IF TAKEN INTO ACCOUNT WOULD HAVE AN ADVERSE AFFECT ON THE ASSESSE E BY A HIGHER ASSESSMENT OF INCOME THAN THE ONE ACTUALLY MADE. THEY SHOULD B E PROXIMATE AND NOT HAVE REMOTE BEARING ON THE ASSESSMENT. THE OMISSION TO D ISCLOSE MAY BE DELIBERATE OR INADVERTENT. THE QUESTION OF CONCEALMENT IS NOT RELEVANT AND IS NOT A PRECONDITION WHICH CONFERS JURISDICTION TO REOPEN T HE ASSESSMENT. IN LIGHT OF ABOVE JUDICIAL PRONOUNCEMENT, WE ARE OF THE VIEW THAT IN THE INSTANT CASE, EVEN THOUGH THE AO HAD FORMED AN OPINION REGA RDING COST OF CONSTRUCTION OF THE FLATS OR THE INVESTMENT MADE IN CONSTRUCTING THE FLATS, THE AO WAS IN RECEIPT OF DVO REPORT SUBSEQUENT TO CLOSE OF THE ORIGINAL ASSESSMENT PROCEEDINGS WHICH IS A FRESH INFORMATION AND BASIS WHICH THE REASONS HAVE BEEN RECORDED FOR REOPENING THE ORIGINAL ASSESSMENT PROCEEDINGS, THE PRINCIPLES OF CHANGE IN OPINION AS CONTENDED BY THE LD AR CANNOT BE INVOKED. ITA NO/ 866/JP/13 SHRI MOHANLAL AGARWAL, JAIPUR VS. THE ACIT, CIRCLE -1, JAIPUR 8 4.6 HAVING SAID THAT IT IS ALSO A TRITE LAW AS HELD IN USHA INTERNATIONAL DECISION (SUPRA) THAT THE REASONS RECORDED OR THE D OCUMENTS AVAILABLE MUST SHOW NEXUS THAT IN FACT THEY ARE GERMANE AND RELEVA NT TO THE SUBJECTIVE OPINION FORMED BY THE ASSESSING OFFICER REGARDING E SCAPEMENT OF INCOME. AT THE SAME TIME, IT IS NOT THE REQUIREMENT THAT THE A SSESSING OFFICER SHOULD HAVE FINALLY ASCERTAINED ESCAPEMENT OF INCOME BY RECORDI NG CONCLUSIVE FINDINGS. THE FINAL ASCERTAINMENT TAKES PLACE WHEN THE FINAL OR R EASSESSMENT ORDER IS PASSED. IT IS ENOUGH IF THE ASSESSING OFFICER CAN SHOW TENT ATIVELY OR PRIMA FACIE ON THE BASIS OF THE REASONS RECORDED AND WITH REFERENCE TO THE DOCUMENTS AVAILABLE ON RECORD THAT INCOME HAS ESCAPED ASSESSMENT. IN THE INSTANT CASE, THE AO HAS RELIED UPON THE REP ORT OF THE VALUATION OFFICER WHO HAS ESTIMATED INVESTMENT DURING THE YEAR UNDER CONSIDERATION AT RS. 34,32,044/- AS AGAINST INVESTMENT OF RS. 23,02.216/ - DECLARED BY THE ASSESSEE. AS PER THE AO, IT IS THEREFORE CLEAR THAT DURING TH E YEAR UNDER CONSIDERATION, THE ASSESESEE HAS MADE UNDISCLOSED INVESTMENT OF RS . 11,29,828/- IN CONSTRUCTION OF FLATS. IN VIEW OF THE ABOVE FACTS, THE AO WAS OF THE OPINION THAT INCOME TO THE TUNE OF RS. 11,29,828/- HAS ESCAPED A SSESSMENT WITHIN MEANING OF SECTION 147 OF THE IT ACT, 1961. THE QUESTION T HAT ARISES FOR CONSIDERATION IS WHETHER THE AO HAS MERELY ACTED UPON THE REPORT OF THE VALUATION OFFICER OR HAVING ESTABLISHED THE NEXUS, HAS INDEPENDENTLY APP LIED HIS MIND AND COME TO A PRIMA FACIE CONCLUSION THAT THE INCOME HAS ESCAPE D ASSESSMENT. IN THIS REGARD, THE LD AR SUBMITTED THAT THE BUILDI NG WAS FORMING PART OF STOCK- IN-TRADE OF THE ASSESSEE AS OUT OF 9 FLATS CONSTRUC TED 7 FLATS WERE SOLD DURING THE ASSESSMENT YEAR 2007-08 AND THE PROFIT WAS TAXE D AS BUSINESS INCOME BY THE AO AS PER ORDER PASSED U/S 143(3) OF THE ACT. THE LD. AR FURTHER SUBMITTED THAT THIS FACTS OF CONSTRUCTION OF 9 FLATS IS ALSO ACKNOWLEDGED BY THE AO AS THE SAME FIND MENTIONED IN THE REASONS FOR REOPENING DA TED 26.03.2010 AND INSPITE OF THAT, THE AO WAS OF THE VIEW THAT INCOME HAS ESCAPED ASSESSMENT TO THE EXTENT OF UNDISCLOSED INVESTMENT WHICH WAS ULTI MATELY TAXED U/S 69 OF THE IT ACT. IN LIGHT OF ABOVE DISCUSSIONS, IT IS THEREFORE CRIT ICAL THAT THE BASIS FOR FORMATION OF BELIEF THAT THE INCOME HAS ESCAPED ASSESSMENT SH OULD HAVE SOME RATIONAL NEXUS WITH THE CONSTRUCTION BUSINESS OF THE ASSESSE E AND THE TREATMENT ITA NO/ 866/JP/13 SHRI MOHANLAL AGARWAL, JAIPUR VS. THE ACIT, CIRCLE -1, JAIPUR 9 THEREOF IN THE RETURN OF INCOME ALREADY SCRUTINIZED BY THE AO. IN THE INSTANT CASE, THE NEXUS HAS NOT BEEN ESTABLISHED AND THE AO HAS BEEN GUIDED SOLELY BY THE VALUATION REPORT WITHOUT APPLYING HIS INDEPENDE NT MIND TO THE FACTS OF THE CASE. HERE WE MAY POINT OUT THAT WE ARE NOT SUGGES TING THAT THE AO HAS TO COME TO A DEFINITE FINDINGS THAT THE INCOME HAS ESC APED ASSESSMENT, ALL WE ARE SUGGESTING IS THAT ON RECEIPT OF THE DVO REPORT, TH E AO SHOULD HAVE EXAMINED THE ASSESSMENT RECORDS AND THE TREATMENT DONE IN TH E RETURN OF INCOME OF SUCH EXPENDITURE/INVESTMENT WHETHER INVESTMENT OR STOCK-IN-TRADE AND ON SUCH EXAMINATION IF HE FOUND THAT THERE IS AN ESCAP EMENT OF INCOME, HE HAS ALL THE POWERS TO PROCEED AHEAD WITH THE ISSUANCE OF NO TICE U/S 148 OF THE IT ACT. IN THE INSTANT CASE THE ASSESSEE HAS SUBMITTED THAT THE BUILDING WAS FORMING PART OF THE STOCK IN TRADE OF THE ASSESSEE AND IF T HE ADDITIONS WERE TO BE MADE BASED ON THE DVOS REPORT, IT WILL ADD TO THE COST OF CONSTRUCTION AS STOCK-IN- TRADE WHICH IN TURN WILL LEAD TO REDUCTION OF PROFI TS ALREADY DISCLOSED IN THE RETURN OF INCOME AND OFFERED TO TAX, WHICH THE AO H AS FAILED TO CONSIDER AND APPRECIATE WHILE ISSUANCE OF NOTICE U/S 148 OF THE ACT. IN THE ENTIRETY OF FACTS AND CIRCUMSTANCES OF THE C ASE, WE ARE OF THE CONSIDERED VIEW THAT THE AO LACKS THE NECESSARY JURISDICTION T O REOPEN THE SUBJECT PROCEEDINGS UNDER SECTION 147 OF THE ACT. IN THE R ESULT, GROUND NO. 1 TAKEN BY ASSESSEE IS ALLOWED. 4.7 NOW COMING THE GROUND NO. 2, WHERE ON MERITS, T HE ASSESSEE HAS CHALLENGED THE ACTION OF LD. CIT(A) IN CONFIRMING T HE ADDITION OF RS. 11,29,828/- MADE BY THE AO U/S 69 ON THE BASIS OF THE VALUATION REPORT OF DVO. IN THE CONTEXT OF GROUND NO. 1, WE HAVE ALREADY NOTED THE FACT WHICH IS NOT DISPUTED BY THE REVENUE THAT THE ASSESSEE IS IN THE BUSINESS OF CONSTRUCTING AND SELLING FLATS AND THE COST OF CONSTRUCTION HAS BEEN SHOWN B Y THE ASSESSEE IN ITS BOOKS OF ACCOUNTS AS STOCK-IN-TRADE AND THE PROFITS ON SA LE OF FLATS HAVE BEEN SHOWN AS BUSINESS INCOME. THE DIFFERENCE IN THE AMOUNT O F INVESTMENT AS DETERMINED BY THE DVO AMOUNTING TO RS 11,29,828 IS IN REALITY ADDITIONAL EXPENDITURE TOWARDS THE COST OF CONSTRUCTION OF THE FLATS. THE PROVISIONS OF SECTION 69 OF THE ACT TALKS ABOUT UNEXPLAINED INVES TMENTS NOT RECORDED IN THE BOOKS OF ACCOUNTS. IN OUR VIEW, THE STOCK-IN-TRADE AS REFLECTED IN THE FINANCIAL STATEMENTS AND RESULTANT PROFITS REPORTED IN THE RE TURN OF INCOME AS BUSINESS ITA NO/ 866/JP/13 SHRI MOHANLAL AGARWAL, JAIPUR VS. THE ACIT, CIRCLE -1, JAIPUR 10 INCOME CANNOT BE EQUATED WITH INVESTMENT. IN ANY CA SE, THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION AND THE SUBSEQUENT YEAR HAS BEEN ACCEPTED WHERE THE PROFITS FROM SALE OF FLATS HAVE BEEN REPO RTED AS BUSINESS INCOME. IN LIGHT OF THIS, AMOUNT OF RS 11,29,828 CANNOT BE ADD ED TO THE INCOME OF THE ASSESSEE U/S 69 OF THE ACT. IN THE RESULT, GROUND NO. 2 OF ASSESSEE IS ALLOWED. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 /0 3/2016. SD/- SD/- ( R.P. TOLANI) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER JAIPUR DATED:- 18/ 03 /2016 PILLAI VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- SHRI MOHANLAL AGARWAL, JAIPUR 2. THE RESPONDENT- THE ACIT, CIRCLE-1, JAIPUR 3. THE CIT(A)-I, JAIPUR 4. THE CIT-I, JAIPUR 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO SA NO.866/JP/13) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR