ITO, Allahabad V. Smt. Chand Rani, Allahabad

MA 7/ALLD/2015

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 2798 (ITAT-ALLAHABAD)
• Duration Of Justice: 6 year(s) 11 month(s) 17 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 15-09-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 15-09-2022
• Assessment Year: 2006-2007
• Appeal Filed On: 28-09-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Unexplained investment; Value adopted by valuation officer; Tangible material; Difference of opinion; Valuation report; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 147; 69; 148; 143(3); 143(1); 143(2); 139(1); 254(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ALLAHABAD BENCH, ALLAHABAD [THROUGH VIRTUAL COURT] BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER M.A. Nos. 06 to 09/ALLD/2015 Assessment Years: 2005-06 to 2008-09 IN I.T.A. Nos. 626 to 629/ALLD/2014 Assessment Years: 2005-06 to 2008-09 Income Tax Officer, Ward-1(1), Allahabad U.P. vs. Smt. Chand Rani Through Legal Heir Sri. Anil Kumar Sachdeva, 5-B.N.K. Mukherji Road, Allahabad. 211001 PAN: ABYPS1238B (Appellant) (Respondent) Appellant by Sanjay Kumar, Advocate Respondent by Shri A.K. Singh, Sr. D.R Date of hearing 13/08/2021 Date of pronouncement /09/2021 O R D E R VIJAY PAL RAO, JUDICIAL MEMBER: By way of these four Misc. Applications, the Revenue is seeking rectification of mistake in the order dated 30.04.2015 of this Tribunal so far as it relates to Smt. Chand Rani in ITA Nos. 626 to 629/Alld/2014. 2. The learned DR has submitted that this Tribunal has decided bunch of appeals relating to co-owners of a property vide a composite impugned order. The Tribunal has quashed the reopening of the assessment on the ground that 2 the DVOs report cannot be a basis for reopening of the assessment when the original assessments were completed under section 143(3). However, in the case of the assessee under consideration namely Smt. Chand Rani, there was no original assessment under section 143(3) and it was only the processing of return of income under section 143(1). Therefore, the facts of the case of this assessee are different from the other assessees and the finding of this Tribunal is a composite order without considering this fact suffers from a mistake which is required to be rectified under section 254(2) of the Income Tax Act. The learned DR has further submitted that the Tribunal has relied upon the decisions of Hon'ble Supreme Court as well as the Hon'ble jurisdiction High Court on the point that when the original assessment is completed under section 143(3) then the reopening is not permissible on the basis of DVOs report whereas in the case of this assessee there was no original assessment under section 143(3) therefore, the finding of this Tribunal in the impugned composite order is not applicable in the case of this assessee and to that extent there is a mistake in the impugned order required to be rectified. 3. On the other hand, the learned AR of the assessee submitted that the Tribunal has reproduced the reasons recorded in the case of the assessee under consideration namely Smt. Chand Rani and therefore, the finding of the Tribunal in the impugned order is in respect of the reasons recorded by the Assessing Officer in the case of the assessee. He has further submitted that the cost of construction which was accepted by the Assessing Officer in the original assessment under section 143(3) in the case of other co-owners as well as under section 143(3) in case of the assessee then the DVOs report cannot be a basis for reopening of the assessment. The Assessing Officer cannot be allowed to reopen the assessment on the basis of change of opinion once the cost of construction of the building / property in question was accepted by the 3 Assessing Officer in the scrutiny assessment under section 143(3) in the cases of the other co-owners of the property. He has supported the impugned order of the Tribunal. 4. We have considered the rival submissions and carefully perused the relevant material on record. There is no dispute that the Assessing Officer has reopen the assessment in respect of four assessees for the assessment years 2005-06 to 2008-09 who are co-owners of the property being house Bearing No. 5-B, N.K. Mukherjee Road, Rajapur, Allahabad. The Assessing Officer proposed to re-assess the income on account of unexplained investment in cost of construction. This Tribunal while deciding the group of appeals in respect of all four co-owners for the assessment years 2005-06 to 2008-09 has held in para 7 to 12 as under:- 7. Heard both the sides and perused the orders of lower authorities the reasons for reopening the assessments and the judgment relied on by the assessee. Apparently in all these cases the AO reopened the assessments based on the Valuation Officer’s report of the DVO. This is very much evident from the reasons recorded in one of these assessees Smt. Chand Rani as under: Reason for initiation of proceeding u/s 147/148 in the case of Smt. Chand Rani, 5-B, N. K. Mukherjee Road, Allahabad, A.Y. 2005-06. During the course of assessment proceedings for the A.Y. 2008- 09, it was found that the assessee has invested in the house property at 5-B, N.K. Mukherjee Road, Rajapur, Allahabad ITA Nos. 616 to 629/Alld/2014 5 with three other family members namely Shri K.L. Sachdeva, Shri Ashok Kumar Sachdeva and Shri Anil Kumar Sachdeva. The assessee declared that the total investment of Rs.1,53,19,766/- has been made from the A.Y. 2005-06 to A.Y. 2008- 09 and his share of investment is 25%. The matter was referred to the Valuation Officer u/s 142A of the I.T. Act. The Valuation Officer vide report dated 30.03.2011 received in this office 04.04.2011 estimated the cost of construction/investment from the A.Y. 2005- 06 to A.Y. 2008-09 in the property at Rs.1,78,10,600/-. The Valuation Officer has estimated the cost of 4 construction/investment in the A.Y. 2005-06 at Rs.93,61,462/-. Considering that the assessees' share is 25% of the total investment which works out to Rs.23,40,365/-. I have reason to believe that the amount of Rs.23,40,365/- invested in construction of the property at 5-B, N. K. Mukherjee Road, Rajapur, Allahabad by the assessee in the A.Y. 2005-06 has escaped assessment. Issue notice u/s 148 of the I.T. Act. 8. On going through the reasons given for reopening the assessments and assessment orders, we find that the assessments were reopened only based on the DVO’s reports and nothing else. AO has not brought on record any other tangible material to suggest that the income had escaped assessments in all these assessment years. The ld. CIT(A) sustained the reopening of assessment stating that in the course of assessments proceedings u/s 143(3) assessees were required to furnish the details of investments and the assessee could not provide complete details. Therefore AO referred the matter to Valuation Officer thus ld. CIT(A) was of the opinion that the assessments were not reopened ITA Nos. 616 to 629/Alld/2014 6 merely on the basis of DVO therefore he sustained the reopening of assessment. 9. On a perusal of reasons it is very much evident that these assessments were reopened only based on the DVO’s report where in the DVO valued the investment more than the investment recorded in the books of accounts. We also find that the difference in value of investment as per DVO and as recorded by the assessee in the books of accounts is less than 10%. We do not find any other reason other than the DVO’s report for reopening of assessment. 10. The Hon’ble Supreme Court in the case of ACIT vs. Dhariya Construction Co. (Supra) held as under: “1. 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 Department was not entitled to reopen the assessment.” 11. The jurisdictional High Court in the case of CIT vs. Aman Cold Storage Pvt. Ltd. (Supra) held as under: 5 “We have gone through the assessment order and find that entire proceedings for reassessment were initiated on the basis ITA Nos. 616 to 629/Alld/2014 7 of the cost estimated by DVO. The A.O. found that since no proper evidence with regard to defects alleged in the report of DVO were furnished despite ample opportunities, and whatever details furnished before the DVO, while evaluating the cost, have duly been considered, and thus there does not appear to be any ground to deviate from the value determined by the valuation officer and therefore difference was unexplained /undisclosed investment in the construction of cold storage invoking the provisions of section 69 of the Act, it was observed by the AO that since the assessee has furnished inaccurate particulars of investment in construction or rather inaccurate particulars of income, penal provisions under section271(1)(c) are also attracted. We do not find any error of law in the order of ITAT relying upon the judgment of the Supreme Court in ACIT vs. Dhariya Construction Co. (Supra). The opinion of DVO per set is not an information for the purpose of reopening of assessment under section 147 of the Act. There is nothing to show that there was any material other than DVO’s report, which is only an estimation to issue notice under section 148 of the Act. The A.O. may be justified in assessment proceedings to obtain report of DVO to meet the estimation of the cost of construction made by the assessee. Having completed assessment it was not open for the AO, in the absence of any material, which includes information, to doubt on the completed assessment and to reassess the assessee on the basis of the report of DVO, which is obtained by him for making a reference under section 142A of the Act. The judicial opinion is consistent that in the absence of any positive material of concealment or escapement of income, the AO cannot reassess the assessee on the basis of the report of DVO. The ground raised in these income tax appeals do not have any merit.” 12. As could be seen from the above the jurisdictional High Court and also the Hon’ble Supreme Court wherein it was held that the DVO ITA Nos. 616 to 629/Alld/2014 8 report cannot be based for reopening assessment. In the cases on hand all these assessments were reopened only based on the DVO report.” 5. There is no dispute that the reasons recorded by the Assessing Officer demonstrate that there are common reasons for reopening of the assessments of all four co-owners by considering the fact that a total investment of Rs. 6 01,53,19,766/- was declared by these co-owners in their return of income filed for these assessment years i.e. 2005-06 to 2008-09. The assessments for other co-owners were completed under section 143(3) wherein the Assessing Officer accepted the total cost of construction and the respective share of the each co-owners. In the case of the assessee under consideration though there is no scrutiny assessment however, the cost of construction as declared by this assessee as its share in the total cost of construction was accepted under section 143(1). Thus, the Assessing Officer has accepted the total cost of construction of the house in question while framing the scrutiny assessment under section 143(3) in respect of three co-owners and there is no dispute regarding the sharing of the total cost of construction amongst the co-owners. After completion of the assessment under section 143(3), the Assessing Officer received the DVOs report determining the valuation of the cost of construction at Rs. 01,78, 10, 600/-. Therefore, the DVO estimated the total cost of construction of the house in question at Rs. 01,78,10,600/- as against the total cost of construction declared by the co-owners in their respective return of income at Rs. 01,53,19,766/-. The acceptance of the total cost of construction by the Assessing Officer in the assessment proceedings under section 143(3) amounts to taking a view by the Assessing Officer on the total cost of construction of the house and therefore, when there is no dispute regarding sharing of the total cost of construction amongst the co-owners then the reopening of the assessment in respect of any of the co-owners based on the DVOs report is nothing but amounts to change of opinion that too without any material. As it is held by the Hon'ble Supreme Court as well as Hon'ble High Court being referred and relied upon by this Tribunal by passing the impugned order that the estimation of cost of construction by DVO is not a material for formation of belief but it is only an information. Therefore, acceptance of cost 7 of construction by the Assessing Officer in the scrutiny assessment under section 143(3) in the assessments of co-owners of the property would amount to taking a possible view by the Assessing Officer so far as the total cost of construction and therefore, even if the return of income in case of one of the co-owners is processed under section 143(1) it would not change the fact that the Assessing Officer has already accepted the total cost of construction in the scrutiny assessment. Hence, once the Assessing Officer accepted the total cost of construction and taken a possible view on an issue which is common for all the assessees being co-owners of the property the reopening of the assessment based on the DVOs report is not permissible. Accordingly, we do not find any substance or merits in the misc. applications of the Revenue. The same are dismissed. 6. In the result, the Misc. Applications filed by the Revenue are dismissed. Order is pronounced in the open court through video conferencing on /09/2021. As per separate dissenting order. Sd/- Sd/- (RAMIT KOCHAR) (VIJAY PAL RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER Allahabad Dated: /09/2021 Sh Copy forwarded to: 1. The Appellant 2. The Respondent 3. The CIT(A) 4. The CIT 5. The DR, I.T.A.T. 6. Guard File By Order (I.T.A.T., Allahabad) True copy 8 M.A. No. 06 to 09/Alld/2015 arising out of I.T.A. NO. 626 to 629 /Alld./2014 (Assessment Year 2005-06 to 2008-09 ) in the case of Income Tax Officer , Ward 1(1), Allahabad. v. Mrs. Chand Rani Through Legal Heir Shri Anil Kumar, Allahabad. PER RAMIT KOCHAR, ACCOUNTANT MEMBER: Unable to agree with the findings and conclusion reached by my learned Brother(J.M.), I proceed to write my separate order. 2. I have gone through the order of my ld. Brother(JM) and given my deep thought to the reasoning , view and findings of my ld. Brother(JM). However, I am not able to agree and concur with the reasoning , view and finding of ld. Brother (JM) on the issues which are discussed by me in later part of this order. The assessee was co-owner of the residential property 5-B, N.K. Mukherjee Road,Rajapur, Allahabad, along with her family members namely Mr. K.L. Sachdeva, Shri Ashok Kumar Sachdeva and Shri Anil Kumar Sachdeva. The said property was constructed by the assessee along with the aforesaid three family members during the period assessment years(ay) 2004-05 to ay:2008-09. The case of Shri Ashok Kumar Sachdeva for ay: 2008-09 was selected by Revenue for framing scrutiny assessment u/s 143(3) read with Section 143(2) of the 1961 Act, wherein the AO enquired about the construction of the aforesaid residential property, and the matter was referred by AO to the Valuation Cell u/s 142A for determining the cost of construction of the aforesaid property, which was done before finalizing the assessment . The said reference to departmental valuation cell was made by the AO on 23.12.2010 vide File No. ITO/R-1(1)/Alld/ Valuation/ 2010-11/307, while the assessment order was passed by AO on 30.12.2010. The said reference is placed in paper book filed by ld. DR , at page number 49-50. The said paper book is placed in file. Thereafter, the assessment in the case of Mr. Ashok Kumar Sachdeva was completed by the AO , vide 9 assessment order dated 30.12.2010 passed u/s 143(3) of the 1961 Act, wherein no addition was made on account of any undisclosed investment in the construction. The said assessment order is placed in paper book filed by ld. DR , at page number 51-52. However, simultaneously office note dated 30.12.2010 was also left by AO in the file , in which it was mentioned that the matter regarding valuation of the property has been referred to the valuation officer of the Department. The departmental valuation officer was requested by AO in the reference to send his report by 29.12.2010 , but the report of the departmental valuation officer was not received by AO till 30.12.2010 viz. the date on which assessment was finalized by the AO. As the case was going to be time barred by limitation on 31.12.2010 within the provisions of the 1961 Act , therefore, the assessment order was passed by AO without considering the issue of investment made by the assessee in this year. Thus, the report of the departmental valuation officer regarding year wise investment in the house property by the assessee could not be considered by the AO during the assessment proceedings. The issue of investment in house property made by the assessee viz. Shi Ashok Kumar Sachdeva , during financial year 2007-08 related to ay: 2008-09 would be considered after receipt of the report of the departmental valuation officer. The aforestated facts are recorded in the office note dated 30.12.2010 prepared by AO and placed in assessment file. It is further mentioned in the office note dated 30.12.2010, that the case of this assessment year may be reopened as per the provisions of the 1961 Act, on the basis of report of the departmental valuation office. The aforesaid office note is placed in paper book filed by ld. DR at page 53. The first valuation report dated 30.03.2011 was submitted by valuation officer , who estimated the cost of construction during the aforesaid four years at Rs. 1,78,10,600/-. All the co-owners of 10 the property has declared the cost of construction at Rs. 1,53,19,766/- , while the departmental valuation officer determined the construction cost of the property to be Rs. 1,78,10,600/- . The AO initiated re-assessment proceedings by issue of notices u/s 148 to all the four co-owners namely Sri K L Sachdeva,Shri Ashok Kumar Sachdeva, Shri Anil Kumar Sachdeva, in respect of four ay’s: 2005-06 to 2008-09. The said notices culminated to an assessments framed by AO u/s 147 read with Section 143(3) , wherein the additions were made by Revenue u/s 69 of the 1961 Act , inter-alia , also in the hands of the assessee on account of cost of construction as determined by the departmental valuation officer , and the assessee not been able to explain the source of investments in the construction of aforesaid property. The assessee filed first appeal with ld. CIT(A) which stood dismissed by ld. CIT(A) , for all the four assessment years viz. 2005-06 to 2008-09, vide common order dated 27.08.2014 passed by ld. CIT(A). The other co-owners also filed appeal with ld. CIT(A) on the same issue, and their respective appeals stood dismissed by ld. CIT(A) , vide common order dated 27.08.2014 passed by ld. CIT(A) in the case of all the four co-owners for ay: 2005-06 to 2008-09. Still aggrieved , the assessee and the other co-owners filed second appeal with Income-Tax Appellate Tribunal(hereinafter called “ the tribunal”) , Allahabad, which stood allowed by Division Bench of tribunal vide common order dated 30.04.2015 in case of all the four co-owners , wherein reopening of the assessment under the provisions of Section 147/148 of the 1961 Act was held to be bad in law and consequentially relief was granted by tribunal . The tribunal took the view that reopening based on DVO report is not permissible. The tribunal while holding that reopening of the assessment is bad in law, relied upon the decision of Hon’ble Supreme Court in the case of ACIT v. Dhariya Construction 11 Company (2010) 328 ITR 515(SC) and decision of Hon’ble Allahabad High Court in the case of CIT v. Aman Cold Storage Private Limited , in ITA No. 297 of 2013 decided on 31.10.2013 .The said common order passed by tribunal is reproduced hereunder: “7. Heard both the sides and perused the orders of lower authorities the reasons for reopening the assessments and the judgment relied on by the assessee. Apparently in all these cases the AO reopened the assessments based on the Valuation Officer’s report of the DVO. This is very much evident from the reasons recorded in one of these assessees Smt. Chand Rani as under: Reason for initiation of proceeding u/s 147/148 in the case of Smt. Chand Rani, 5-B, N. K. Mukherjee Road, Allahabad, A.Y. 2005-06. During the course of assessment proceedings for the A.Y. 2008- 09, it was found that the assessee has invested in the house property at 5-B, N.K. Mukherjee Road, Rajapur, Allahabad with three other family members namely Shri K.L. Sachdeva, Shri Ashok Kumar Sachdeva and Shri Anil Kumar Sachdeva. The assessee declared that the total investment of Rs.1,53,19,766/- has been made from the A.Y. 2005-06 to A.Y. 2008-09 and his share of investment is 25%. The matter was referred to the Valuation Officer u/s 142A of the I.T. Act. The Valuation Officer vide report dated 30.03.2011 received in this office 04.04.2011 estimated the cost of construction/investment from the A.Y. 2005-06 to A.Y. 2008-09 in the property at Rs.1,78,10,600/-. The Valuation Officer has estimated the cost of construction/investment in the A.Y. 2005-06 at Rs.93,61,462/-. Considering that the assessees' share is 25% of the total investment which works out to Rs.23,40,365/-. I have reason to believe that the amount of Rs.23,40,365/- invested in construction of the property at 5-B, N. K. Mukherjee Road, Rajapur, Allahabad by the assessee in the A.Y. 2005-06 has escaped assessment. Issue notice u/s 148 of the I.T. Act. Issue notice u/s 148 of the I.T.Act. 8. On going through the reasons given for reopening the assessments and assessment orders, we find that the assessments were reopened only based on the DVO’s reports and nothing else. AO has not brought on record any other tangible material to suggest that the income had escaped assessments in all these assessment years. The ld. CIT(A) 12 sustained the reopening of assessment stating that in the course of assessments proceedings u/s 143(3) assessees were required to furnish the details of investments and the assessee could not provide complete details. Therefore AO referred the matter to Valuation Officer thus ld. CIT(A) was of the opinion that the assessments were not reopened merely on the basis of DVO therefore he sustained the reopening of assessment. 9. On a perusal of reasons it is very much evident that these assessments were reopened only based on the DVO’s report where in the DVO valued the investment more than the investment recorded in the books of accounts. We also find that the difference in value of investment as per DVO and as recorded by the assessee in the books of accounts is less than 10%. We do not find any other reason other than the DVO’s report for reopening of assessment. 10. The Hon’ble Supreme Court in the case of ACIT vs. Dhariya Construction Co. (Supra) held as under: “1. 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 Department was not entitled to reopen the assessment.” 11. The jurisdictional High Court in the case of CIT vs. Aman Cold Storage Pvt. Ltd. (Supra) held as under: “We have gone through the assessment order and find that entire proceedings for reassessment were initiated on the basis of the cost estimated by DVO. The A.O. found that since no proper evidence with regard to defects alleged in the report of DVO were furnished despite ample opportunities, and whatever details furnished before the DVO, while evaluating the cost, have duly been considered, and thus there does not appear to be any ground to deviate from the value determined by the valuation officer and therefore difference was unexplained /undisclosed investment in the construction of cold storage invoking the provisions of section 69 of the Act, it was observed by the AO that since the assessee has furnished inaccurate particulars of investment in construction or rather inaccurate particulars of income, penal provisions under section271(1)(c) are also attracted. 13 We do not find any error of law in the order of ITAT relying upon the judgment of the Supreme Court in ACIT vs. Dhariya Construction Co. (Supra). The opinion of DVO per set is not an information for the purpose of reopening of assessment under section 147 of the Act. There is nothing to show that there was any material other than DVO’s report, which is only an estimation to issue notice under section 148 of the Act. The A.O. may be justified in assessment proceedings to obtain report of DVO to meet the estimation of the cost of construction made by the assessee. Having completed assessment it was not open for the AO, in the absence of any material, which includes information, to doubt on the completed assessment and to reassess the assessee on the basis of the report of DVO, which is obtained by him for making a reference under section 142A of the Act. The judicial opinion is consistent that in the absence of any positive material of concealment or escapement of income, the AO cannot reassess the assessee on the basis of the report of DVO. The ground raised in these income tax appeals do not have any merit.” 12. As could be seen from the above the jurisdictional High Court and also the Hon’ble Supreme Court wherein it was held that the DVO report cannot be based for reopening assessment. In the cases on hand all these assessments were reopened only based on the DVO report. 13. In the circumstances respectfully following the above decisions we hold that reopening of assessment u/s 147 is bad in law. Ground raised by the assessee challenging the reopening of assessment u/s 147 is allowed. As we have held that the reopening of assessment is bad in law adjudication of grounds on merits becomes academic and therefore we are not going into these grounds. 14. In the result, appeals of the assessees are partly allowed.” As could be seen in the aforesaid tribunal order, the tribunal proceeded on the belief that the originally assessment was framed by Revenue in the case of the assessee under the provisions of Section 143(3) read with Section 143(2) of the 1961 Act , as it is mentioned at para 8 of the tribunal order dated 30.04.2015 , that the ld. CIT(A) sustained the reopening of the assessment on the grounds that in the course of assessment proceedings u/s 14 143(3), the assessee were required to furnish the details of investments and the assessee could not provide the complete details, while the fact of the matter as is emerging from records is that the assessee’s return of income originally filed u/s 139(1) for all the aforesaid ay’s: 2005-06 to 2008-09 were never originally scrutinized by Revenue under the provisions of Section 143(3) read with Section 143(2) of the 1961 Act, , and the return originally filed by assessee u/s 139(1) of the 1961 Act were merely processed by Revenue u/s 143(1) of the 1961 Act , and hence there is no question of the AO having originally formed any opinion. Thus, it is an admitted fact that the assessee originally filed return of income u/s 139(1) for all the aforesaid ay’s: 2005-06 to 2008-09 with Revenue , but the case of the assessee were never selected by Revenue for framing scrutiny assessment within the provisions of Section 143(2) read with Section 143(3), and the returns were merely processed under the provisions of Section 143(1). The Revenue being aggrieved by aforesaid finding of the tribunal has filed this M.A. and pleadings are made that there is no question of framing of any opinion by the AO originally as the returns of income filed u/s 139(1) by the assessee namely Mrs. Chand Rani for all the four assessment years 2005-06 to 2008-09 were never scrutinized u/s 143(3) read with Section 143(2) of the 1961 Act , and were merely processed u/s 143(1) of the 1961 Act. Thus,it is claimed that the tribunal proceeded on the wrong premise that the return of income in the case of the assessee namely Mrs. Chand Rani were originally scrutinized u/s 143(3) of the 1961 Act. Further, it is also brought to our notice that return of income filed by the assessee for all the years viz. ay’s: 2005-06 to 2008-09 were filed by assessee, without making any disclosures as to investment made by the assessee in construction of aforesaid property. The copies of said returns are placed by ld. DR in the paper book filed with tribunal, at page 1-4. I 15 have carefully gone through the order dated 30.04.2015 passed by the tribunal and other material on record, I am of the considered view that originally , the assessee filed return of income u/s 139(1) of the 1961 Act for all the four years viz. ay’s: 2005-06 to 2008-09, and the said returns of income was merely processed by Revenue u/s 143(1) of the 1961 Act , and there were no scrutiny assessment u/s 143(3) read with Section 143(2) of the 1961 Act framed by Revenue in the case of the assessee , for all the four ay’s: 2005-06 to 2008-09. Thus, since no scrutiny assessments were framed by Revenue and the returns of income were merely processed u/s 143(1) of the 1961 Act, there was no question of forming of any opinion by the AO. Hence, it could not be said that there is any change of opinion by Revenue , when the Revenue invoked reassessment provisions under Section 147/148 of the 1961 Act . Reference is drawn to decision of Hon’ble Supreme Court in the case of ACIT v. Rajesh Jhaveri Stock Brokers Private Limited (2007) 291 ITR 500(SC). Further, it is observed that the tribunal has held that reopening based on DVO report is impermissible. The tribunal has relied upon the decision of Hon’ble Supreme Court in the case of Dhariya Construction Company(Supra) and Hon’ble Allahabad High Court in the case of Aman Cold Storage Private Limited(supra). It is brought to our notice by ld. DR that there were two Hon’ble Allahabad High Court decisions, firstly in the case of Sunder Carpet Industries v. ITO reported in (2010) 324 ITR 417(All. HC) and secondly in the case of Sushrut Institute of Plastic Surgery v. DCIT reported in (2014) 224 Taxman 304(All. HC), wherein in both the cases the return was originally processed u/s 143(1) of the 1961 Act and later reopening u/s 147/148 of the 1961 Act based on DVO report was upheld by Hon’ble Jurisdictional High Court. It was submitted by ld. DR that these two judgments of Hon’ble Jurisdictional High Court are not considered by tribunal , and both the aforesaid 16 judgments were delivered by Hon’ble Jurisdictional High Court prior to the tribunal order dated 30.04.2015. I have gone through these judgments. The judgment of Hon’ble Allahabad High Court in the case of Sushrut Institute of Plastic Surgery(supra) is after the decision of Hon’ble Allahabad High Court in the case of Aman Cold Storage Private Limited (supra), and judgment of Hon’ble Supreme Court in the case of Dhariya Construction Company(supra) was considered by Hon’ble Allahabad High Court in its judgment in the case of Sushrut Institute of Plastic Surgery(supra) and then the decision was taken in favour of Revenue by upholding reopening of assessment u/s 147/148 of the 1961 Act. Moreover, the judgment of Hon’ble Allahabad High Court in the case of Aman Cold Storage Private Limited (supra) is where the return of income was originally scrutinized by Revenue u/s 143(3) of the 1961 Act. Thus, after considering the entire material on record , I am of the considered view that there is a mistake apparent from record in the appellate order dated 30.04 2015 passed by tribunal and the said order needs to be recalled u/s 254(2) of the 1961 Act. All the four MA’s filed by Revenue are allowed. The Registry is directed to fix these four appeals in ITA no. 626 to 629/Alld/2014 for ay’s: 2005-06 to 2008-09 for hearing in regular course before the Division Bench , for which notices of hearing to both the parties is directed to be issued . I order accordingly. 3. In the result , MA No. 06 to 09/Alld/2015 , arising out of appeal in ITA no. 626 to 629/Alld/2014 , for ay’s: 2005-06 to 2008-09 are allowed. Order pronounced in the open Court on 09.2021at Allahabad Sd/- 15.09.2021 [RAMIT KOCHAR] ACCOUNTANT MEMBER DATED: /09/2021 17 Copy forwarded to: 1. Appellant – The Income Tax Officer, Ward 1(1), Allahabad, U.P. 2. Respondent –Mrs Chand Rani through Legal heir Mr. Anil Kumar Sachdeva, 5- B.N.K. Mukherji Road, Allahabad,U.P. 211001 3. CIT(A) , Allahabad 4. CIT, Allahabad 5. DR – The Sr, DR, ITAT, Allahabad, U.P. By order (I.T.A.T, Allahabad) 18 INCOME TAX APPELLATE TRIBUNAL ALLAHABAD BENCH – VIRTUAL COURT BEFORE SHRI R.S. SYAL, VICE PRESIDENT (AS THIRD MEMBER) M.A Nos.06 to 09/Alld/2015 (Arising out of ITA Nos.626 to 629/Alld/2014) Assessment Years : 2005-06 to 2008-09 ITO, Ward-1(1), Allahabad Vs. Smt. Chand Rani, Through Legal heir Shri Anil Kumar Sachdeva 5-B, N.K. Mukherji Road, Allahabad PAN : ABYPS1238B Appellant Respondent ORDER The following point of difference has been referred to me by the Hon’ble President u/s.255(4) of the Income-tax Act, 1961 (hereinafter also called ‘the Act’) : “Whether facts and circumstances of the case, the order of the Tribunal dated 30-04-2015 is suffering from any mistake apparent on record to be rectified under section 254(2) of the Income Tax Act and thereby the same is to be recalled to that extent or not? Appellant by Shri A.K. Singh, CIT-DR Respondent by Shri Sanjay Kumar, Advocate. Date of hearing 7-09-2022 Date of pronouncement 09-09-2022 19 2. Pithily put, the facts of the case are that a building at 5-B, N.K. Mukherjee Road, Rajapur, Allahabad was constructed by four co-owners, namely, Smt.Chand Rani (the assessee in question), Shri Ashok Kumar Sachdeva, Shri Anil Kumar Sachdeva and Late Shri K.L. Sachdeva during the four financial years relevant to the Assessment years 2005-06 to 2008-09. The AO enquired about the investment in the construction during the course of assessment proceedings in the case of Shri Ashok Kumar Sachdeva for the A.Y. 2008-09 and referred u/s.142A of the Act the matter of determining the estimated cost of construction to the District Valuation Officer (DVO), who estimated total cost of construction at Rs.1,78,10,600/-. The Assessing Officer (AO) noticed that total investment declared by the four assessees during the above period of four years was Rs.1,53,19,766/-. He initiated the instant re-assessment proceedings by issuing notices u/s.148, inter alia, to the assessee in respect of the four assessment years under reference. In response, the assessee submitted that the original returns filed by her be treated as the returns filed in compliance to the notices u/s.148. The assessments for the A.Ys. 2005-06 to 2008-09 came to be completed by making additions 20 of Rs.21,69,250/-, Rs.3,29,400/-, Rs.11,50,325/- and Rs.5,12,650/- respectively, towards 25% of the estimated cost of construction determined by the DVO. All the co-owners filed appeals before the ld. CIT(A) for the four years under consideration. The ld. CIT(A) echoed the assessment orders vide his combined order dated 27-08-2014. All the four assesses filed further appeals before the Tribunal also urging that the initiation of re-assessments was invalid because these were based only on the DVO’s report. Relying on the judgment of the Hon’ble Supreme Court in Dhariya Construction Company (2010) 328 ITR 515 (SC) and that of the Hon’ble jurisdictional High Court in CIT Vs. Aman Cold Storage Pvt. Ltd. (ITA No. 297 of 12013), the Tribunal held that the initiation of all the reassessments based on the DVO’s report were invalid. As such, it did not go into the merits of the additions. 3. Thereafter, the Revenue filed the instant Miscellaneous Applications contending that that the facts of the assessee under consideration were different inasmuch as no regular assessments u/s 143(3) of the Act were originally made in her hands. It was further submitted that there could be no case for change of opinion for applying 21 the ratio of the judgments in Dhariya Construction Company (supra) and Aman Cold Storage (supra) so as to vitiate the initiation of reassessments. The ld. Judicial Member, who wrote the first draft, concurred with the assessee’s submissions that the Revenue was not justified in initiating the re-assessment proceedings on the basis of the DVO’s report that was received after the completion of the assessment made u/s 143(3) in the case of one of the co-owners for the A.Y. 2008-09. In reaching this conclusion, he relied on the same judgments as were found applicable by the Tribunal in its order u/s 254(1) of the Act. In oppugnation, the ld. Accountant Member noticed that the Tribunal in its order u/s 254(1) proceeded on the belief that the original assessments in the case of the assessee were framed u/s.143(3) of the Act, which was not correct because no scrutiny assessment was made in the hands of the assessee for any of the four years under consideration. As the returns filed by the assessee u/s. 139(1) were simply processed u/s 143(1) of the Act, without undertaking any compulsory scrutiny u/s. 143(3), he opined that it could not be said that the AO formed any opinion originally so as to infer any change of opinion on the receipt of the report of the DVO. To fortify his 22 point of view, he relied on the judgments of the Hon’ble jurisdictional High Court in Sunder Carpet Industries Vs. ITO (2010) 324 ITR 417 (All) and Sushrut Institute of Plastic Surgery Vs. DCIT (2014) 224 Taxman 304 (All). 4. I have heard the rival submissions and gone through the relevant material on record. There is no dispute that the assessee filed her returns for the four assessment years under consideration u/s. 139(1) of the Act and scrutiny assessment did not take place for any of the years in her case. The reassessments were initiated only pursuant to the assessment u/s 143(3) for the A.Y. 2008-09 in the case of Shri Ashok Kumar Sachdeva, when the matter of estimation of cost of construction was referred to the DVO u/s.142A of the Act. Pursuant to the DVO’s report, showing difference in the total declared cost of construction/investment at Rs.1,53,19,766/- for the entire construction and such cost as estimated by the DVO at Rs.1,78,10,600/-, the AO proceeded to reopen the assessments of the assessee for the four years. He recorded the following reasons for the A.Y. 2005-06: “During the course of assessment proceedings for the A.Y. 2008-09, it was found that the assessee has invested in the house property at 5-B, N.K. Mukherjee Road, Rajapur, Allahabad with three other family members 23 namely Shri K.L. Sachdeva, Shri Ashok Kumar Sachdeva and Shri Anil Kumar Sachdeva. The assessee declared that the total investment of Rs.1,53,19,766/- has been made from the A.Y. 2005-06 to A.Y. 2008-09 and his share of investment is 25%. The matter was referred to the Valuation Officer u/s.142A of the I.T. Act. The Valuation Officer vide report dated 30- 03-2011, received in this office 04-04-2011 estimated the cost of construction/investment from the A.Y. 2005-06 to A.Y. 2008-09 in the property at Rs.1,78,10,600/-. The Valuation Officer has estimated the cost of construction/investment in the A.Y. 2005-06 at Rs.93,61,462/-. Considering that the assessee’s share is 25% of the total investment which works out to Rs.23,40,365/-. I have reason to believe that the amount of Rs.23,40,365/- invested in construction of the property at 5-B, N.K. Mukherjee Road, Rajapur, Allahabad by the assessee in the A.Y. 2005-06 has escaped assessment.” 5. Similar reasons have been recorded for the other three assessment years except for the change in the figures as mentioned in the second and third paras. But for that, the substance of the reasons is identical. 6. It can be seen from the above reasons that in the first para, the AO has recorded the details of the property, jointly owned by four persons, whose construction went on for four years with the declared total investment at Rs.1,53,19,766/- as against the DVO estimating such cost of construction/investment at Rs.1,78,10,600/- and the resultant figures individually for each of the years relating to the assessee. The AO in the assessment orders for all the years under consideration has drawn a chart with the following remarks: 24 “Financial year wise investment in construction declared by the assessee vis- à-vis estimates cost of investment/construction reported by the Valuation Officer is as under : Sl.No. Financial Year Declared cost of Construction/Investment (Rs.) Estimated cost of Construction/Investment (Rs.) 1 Oct, 2003 1,39,486/- 1,53,000/- 2 2004-05 79,12,764/- 86,77,000/- 3 2005-06 12,01,516/- 13,17,600/- 4 2006-07 41,96,000/- 46,01,300/- 5 2007-08 18,70,000/- 20,50,600/- 6 2010-11 9,22,100/- 10,11,100/- Total 1,62,41,866/- 1,78,10,600/- 7. On going through the chronology of events, it is manifest that the AO initiated the reassessment proceedings with the only reason that: `The assessee declared that the total investment of Rs.1,53,19,766/- has been made from the A.Y. 2005-06 to A.Y. 2008-09 and his share of investment is 25%. The matter was referred to the Valuation Officer u/s.142A of the I.T. Act. The Valuation Officer vide report dated 30-03-2011, received in this office 04-04-2011 estimated the cost of construction/investment from the A.Y. 2005-06 to A.Y. 2008-09 in the property at Rs.1,78,10,600/-’. Thereafter, the assessment orders u/s 147 were passed by the AO for all the years by noting the: “Financial year wise investment in construction declared by the assessee vis-à-vis estimates cost of investment/construction reported by the Valuation Officer’. The Tribunal 25 in its order u/s 254(1) declared invalid the initiation of reassessment proceedings based on the report of the DVO. In the proceedings u/s 254(2) of the Act, the ld. JM opined that the reassessments on the basis of the DVO’s report were not legally initiated for the four years under consideration. The ld. AM also took note of the initiation of reassessment proceedings based on the DVO’s report only but held the same to be validly initiated because the original proceedings in the hands of the assessee were not by means of scrutiny assessments u/s 143(3) and hence the report of the DVO did not lead to change of opinion. This shows that from the stage of recording of reasons up to the difference of opinion between the ld. Members u/s 254(2), there has been no quarrel on the fact that the initiation of reassessment has been premised only on the basis of the report of the DVO. Even otherwise also, it is amply borne out that there is no reference to any other material/information in the reasons constituting a basis for initiation of the reassessment proceedings. 8. The first issue which requires my consideration is whether the report of the DVO provides bedrock for the initiation of reassessment proceedings? Both the sides have relied on certain judgments fortifying 26 their respective points of view. I turn to such judgments in seriatim from the point of time of their rendition. The first judgment is that of the Hon’ble Summit Court in Dhariya Construction Company (SC) (supra) which was rendered on 16-02-2010 holding that the per se opinion of the DVO is not an information for the purpose of reopening assessment u/s.147 and hence, the Department was precluded from reopening the assessment only on the basis of the opinion of the DVO. This judgment supports the point of view of the assessee that the solitary report of the DVO in this case cannot lead to a valid initiation of reassessment proceedings. 9. The next judgment, in the point of time is, that of the Hon’ble jurisdictional High Court in Sunder Carpet Industries (supra), which was rendered on 15-04-2010. In this judgment, the Hon’ble jurisdictional High Court has held that reopening can be done on the basis of the Valuation report of the DVO disclosing higher valuation than that recorded in the books of account. However, it is pertinent to note that in this case, the Hon’ble High Court considered several judgments on the issue – both for and against the assessee – but preferred to go with the set 27 of judgments, including, Bawa Abhai Singh Vs. DCIT (2002) 253 ITR 83 (Delhi) in which the validity of initiation of reassessment proceedings on the basis of DVO’s report was held to be valid. Though the judgment in Sunder Carpet Industries (supra) was rendered barely two months after the judgment of the Hon’ble Supreme Court in Dhariya Construction Company (SC)(supra), but the Apex Court judgment was neither cited nor consequently considered by the Hon’ble High Court. 10. Thereafter, this issue again came up before the Hon’ble jurisdictional High Court in Aman Cold Storage Pvt. Ltd. The Hon’ble High Court this time, vide its judgment dated 31-01-2013, considered Dhariya Construction Company (SC)(supra), and held that the AO cannot re-assess on the basis of the report of the DVO. 11. The next judgment in the point of time is that of the Hon’ble jurisdictional High Court in Sushrut Institute of Plastic Surgery (supra). It was rendered on 02-04-2014 after considering Dhariya Construction Company (SC)(supra). In this case, the Hon’ble jurisdictional High Court upheld the validity of initiation of reassessment proceedings by observing that: “During the concerned year, the assessee’s share capital, 28 secured loan, investment in building etc., increased but the petitioner failed to explain the source of increasement........Thus, apart from the District Valuation Officer, there are sufficient reasons for AO to believe that income chargeable to tax has escaped assessment”. It is thus discernible from this judgment that when there are other reasons with the AO, apart from the DVO’s report, which lend credence to the formation of belief about the escapement of income, then there can be no impediment in validly initiating reassessment proceedings. 12. It is befitting to note that the judgment of the Hon’ble jurisdictional High Court in Sunder Carpet Industries (supra), deciding the issue in favour of the Revenue, is based, inter alia, on Bawa Abhai Singh (Del)(supra) deciding similar issue in favour of the Revenue. The judgment of Bawa Abhai Singh (supra) once again came up for consideration before the Hon’ble Delhi High Court itself in Mahashay Chunnilal Vs. DCIT (2014) 362 ITR 314 (Delhi). The Hon’ble Delhi High Court in the latter judgment considered its earlier judgment in Bawa Abhai Singh (supra) but preferred to decide the issue in favour of the 29 assessee by relying on the judgment of the Hon’ble Supreme Court in Dhariya Construction Company (SC) (supra). 13. At this stage, it is relevant to mention that apart from the judgments relied by both the sides before the Tribunal during the proceedings u/s 254(1)/(2) of the Act, the Hon’ble jurisdictional High Court in CIT & Another Vs. Vrindavan Real Estate (P) Ltd. (2012) 254 CTR 10 (Allahabad) considered a matter in which the initiation of reassessment was based only on the report of the DVO. Following the judgment in Dhariya Construction Company (SC)(supra), which is a binding precedent under Article 141 of the Constitution of India, the Hon’ble High Court held that the per se report of the DVO was not an information for reopening assessment. 14. On a survey of the above judgments rendered by the Hon’ble Supreme Court and the Hon’ble High Courts, the position which clearly emerges is that after the advent of Dhariya Construction Company (SC)(supra), a reassessment, based solely on the DVO’s report, being, just his opinion of the investment made by the assessee, cannot be sustained as the DVO’s report, without any other material or information, 30 does not constitute a justifiable material leading to the formation of reasons to believe about escapement of income. 15. Reverting to the facts of the extant case, it is seen from the reasons for reassessment reproduced above that the sole reason given by the AO for initiating the reassessment proceedings is the report of the DVO giving higher estimation of the cost of construction vis-à-vis that declared by the co-owners. There is no reference to any other material in the reasons for reassessment. At the cost of repetition, it is accentuated that no difference of opinion has arisen between the ld. Members on the issue that the DVO’s report was the only reason to initiate reassessment. The difference arose on the point as to whether the report of the DVO was a good reason for initiating the reassessment? Whereas the ld. JM held that initiation of reassessment on the basis of the DVO’s report was not valid for the reason that the AO had accepted the amount of investment in the hands of other co-owners in the scrutiny assessment and now basing the reassessment on the DVO’s report amounted to change of opinion, the ld. AM opined that initiation of reassessment was valid because the original 31 assessment in this case was not made u/s 143(3) of the Act and hence it was not a case of change of opinion. 16. Section 147 at the material time provides that: `If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income ...’. It is only when the AO gets some justifiable material, on the basis of which he forms reason to believe that some income chargeable to tax escaped assessment, that he can embark upon reassessment. The essence is that there should first be some cognizable material leading to formation of belief about escapement of income. Once such a material comes up before the AO, the second question arises if it is a case of change of opinion or not? If such material in the first instance itself is not acceptable as a cognizable material providing any foundation for the formation of belief about the escapement of income, then the second question of having either formed the opinion earlier or changing the opinion afterwards on the strength of such material, does not arise. To illustrate, if the AO gets some information from the Investigation wing of the 32 Department about the assessee indulging into a clandestine transaction, then such information will constitute justifiable material for the formation of belief about the income escaping assessment. Now, if such a material was already available with the AO at the time of original assessment, which he considered but chose not to make any addition on that basis, then the AO cannot later on reopen the assessment based on such material because it would mean that though there is a justifiable material buttressing the belief about escapement of income, but considering the same material, which was earlier considered during the original assessment, would amount to change of opinion. So, the first step in the process of initiation of reassessment is that there should be some legally justifiable material with the AO supporting the formation of belief about the escapement of income. The concept of change of opinion is a second step in the sequence, which can take place only when the consequence of the first step, namely, the availability of some justifiable material, turns out to be such which was earlier considered by him in the original assessment. Thus, it is vivid that the existence of some legally justifiable material leading the AO to form belief about the escapement 33 of income is a sine qua non before espousing the second question of change of opinion. 17. From the discussion made supra, it is graphically clear that the sole reason for the initiation of reassessment in this case is the report of the DVO. Going with the ratio decidendi of Dhariya Construction Company (SC)(supra) and others, a report of the DVO per se does not constitute a legally justifiable material for the formation of belief by the AO about the escapement of income, which is a first step in the initiation of reassessment. As such, the question of change or no-change of opinion can’t arise because the solitary report of the DVO fails to cross the hurdle of being considered as a justifiable material for reassessment. Strictly speaking, the present is not a case of `change’ or `no change’ of opinion - as neither any opinion was formed earlier because of the absence of the scrutiny assessment; nor the report of the DVO can be characterized as a justifiable material coming to the notice of the AO giving the groundwork for formation of belief about the escapement of income. 18. At this juncture, it is pertinent to note that change of opinion is not the only disability which prohibits the AO from taking action by issuing 34 notice u/s 148. Power to reassess is circumscribed by several other factors. Seeing the wide amplitude of the question referred to the third member, which embraces the examination as to whether the order of the Tribunal u/s 254(1) of the Act is suffering from any mistake apparent on record so as to be rectified u/s 254(2), the issue of initiation of reassessment based only on change or no change of opinion is not the be- all end-all of the matter. The sweeping question is whether the original order of the Tribunal requires recall/rectification in terms of section 254(2) of the Act. Even otherwise, the question as to whether or not the report of the DVO is a cognizable material for initiation of reassessment is just another aspect of the larger question as to whether or not the consideration of the report of the DVO amounts to change of opinion so as to initiate reassessment. Viewed in this hue, it is held that the initiation of reassessment is invalid absent any foundation because the solitary report of the DVO, without anything else, cannot lead to formation of belief by the AO about any escapement of income. Ex consequenti, the question posed for my consideration is answered in negative by opining that on the facts and in the circumstances of the case, the order of the 35 Tribunal dated 30-04-2015 is not suffering from any mistake apparent on record so as to be rectified under section 254(2) of the Income Tax Act. Ergo, I agree with the conclusion drawn by the ld. JM. 19. Before parting, I consider it as my duty to mention that the ld. AR heavy harped on the factual aspects of the matter to contend that the assessee in question did not contribute towards the construction cost as was duly intimated to the AO during the assessment proceedings of Sh. Ashok Sachdeva by giving details of total investment amounting to Rs.1.53 crore financed by a loan of Rs.98.17 lakh obtained from the Punjab National bank and the remaining amount coming from the other three co-owners, namely, Shri K.L. Sachdeva, Shri Ashok Kumar Sachdeva and Shri Anil Kumar Sachdeva. Referring to a letter addressed by Sh. Ashok Sachdeva to the AO during the course of proceedings for the A.Y. 2008-09, a copy placed at page 41 of the Departmental paper book, he submitted that Smt. Chand Rani albeit did not make any investment in the cost of construction but undertook to repay a part of loan taken from PNB. In the hue of these facts, it was contended that there was no scope for making any addition towards cost of construction 36 in her hands. The ld. DR strongly opposed to the contention by submitting that the factum of the assessee having not invested anything in the cost of construction neither in the orders of the AO/CIT(A) nor the order of the Tribunal. 20. Suffice to say, my jurisdiction as a third member is confined only to the difference of opinion between the ld. Members and, as such, I refrain from adjudicating on any aspect other than that, including the factual panorama now brought to my notice by the ld. AR, which is neither the subject matter of the orders of the authorities below or the order of the Tribunal u/s 254(1) or the opinions of the ld. Members u/s 254(2) of the Act. 21. The Registry of the Tribunal is directed to list this matter before the Division Bench for passing an order in accordance with the majority view. Sd/- [R.S. SYAL] VICE PRESIDENT Dated, 09 th September, 2022. Satish Copy forwarded to: 1. Appellant 37 2. Respondent 3. CIT 4. CIT (A) 5. DR, ITAT आदेशानुसार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune 38 IN THE INCOME TAX APPELLATE TRIBUNAL ALLAHABAD BENCH, ALLAHABAD BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER M.A. Nos. 06 to 09/ALLD/2015 Assessment Years: 2005-06 to 2008-09 IN I.T.A. Nos. 626 to 629/ALLD/2014 Assessment Years: 2005-06 to 2008-09 Income Tax Officer, Ward-1(1), Allahabad U.P. vs. Smt. Chand Rani Through Legal Heir Sri. Anil Kumar Sachdeva, 5-B.N.K. Mukherji Road, Allahabad. 211001 PAN-ABYPS1238B (Appellant) (Respondent) Appellant by Sanjay Kumar, Advocate Respondent by Shri A.K. Singh, Sr. D.R Date of hearing 16/09/2022 Date of pronouncement 16/09/2022 O R D E R VIJAY PAL RAO, JUDICIAL MEMBER: By way of these four Misc. Applications, the Revenue is seeking rectification of mistake in the order of this Tribunal dated 30.04.2015 in I.T.A. Nos. 626 to 629/Alld/2014. 2. Since, there was a difference of opinion between the Members of Division Bench regarding any mistake apparent from record to be rectified under section 254(2) of the Income Tax Act therefore, the point of difference was referred to the Hon'ble Third Member to be resolved as per the majority view. The Hon'ble Third Member, vide order dated 9.9.2022 has decided the issue in para 4 to 21 as under:- 39 “4. I have heard the rival submissions and gone through the relevant material on record. There is no dispute that the assessee filed her returns for the four assessment years under consideration u/s. 139(1) of the Act and scrutiny assessment did not take place for any of the years in her case. The reassessments were initiated only pursuant to the assessment u/s 143(3) for the A.Y. 2008-09 in the case of Shri Ashok Kumar Sachdeva, when the matter of estimation of cost of construction was referred to the DVO u/s.142A of the Act. Pursuant to the DVO’s report, showing difference in the total declared cost of construction/investment at Rs.1,53,19,766/- for the entire construction and such cost as estimated by the DVO at Rs.1,78,10,600/-, the AO proceeded to reopen the assessments of the assessee for the four years. He recorded the following reasons for the A.Y. 2005-06: “During the course of assessment proceedings for the A.Y. 2008-09, it was found that the assessee has invested in the house property at 5-B, N.K. Mukherjee Road, Rajapur, Allahabad with three other family members namely Shri K.L. Sachdeva, Shri Ashok Kumar Sachdeva and Shri Anil Kumar Sachdeva. The assessee declared that the total investment of Rs.1,53,19,766/- has been made from the A.Y. 2005-06 to A.Y. 2008-09 and his share of investment is 25%. The matter was referred to the Valuation Officer u/s.142A of the I.T. Act. The Valuation Officer vide report dated 30-03-2011, received in this office 04-04-2011 estimated the cost of construction/investment from the A.Y. 2005-06 to A.Y. 2008-09 in the property at Rs.1,78,10,600/-. The Valuation Officer has estimated the cost of construction/investment in the A.Y. 2005-06 at Rs.93,61,462/-. Considering that the assessee’s share is 25% of the total investment which works out to Rs.23,40,365/-. I have reason to believe that the amount of Rs.23,40,365/- invested in construction of the property at 5-B, N.K. Mukherjee Road, Rajapur, Allahabad by the assessee in the A.Y. 2005-06 has escaped assessment.” 5. Similar reasons have been recorded for the other three assessment years except for the change in the figures as mentioned in the second and third paras. But for that, the substance of the reasons is identical. 6. It can be seen from the above reasons that in the first para, the AO has recorded the details of the property, jointly owned by four persons, whose construction went on for four years with the declared total investment at Rs.1,53,19,766/- as against the DVO estimating such cost of construction/investment at Rs.1,78,10,600/- and the resultant figures individually for each of the years relating to the assessee. The AO in the assessment orders for all the years under consideration has drawn a chart with the following remarks: “Financial year wise investment in construction declared by the assessee vis-à-vis estimates cost of investment/construction reported by the Valuation Officer is as under : 40 Sl.No. Financial Year Declared cost of Construction/Investment (Rs.) Estimated cost of Construction/Investment (Rs.) 1 Oct, 2003 1,39,486/- 1,53,000/- 2 2004-05 79,12,764/- 86,77,000/- 3 2005-06 12,01,516/- 13,17,600/- 4 2006-07 41,96,000/- 46,01,300/- 5 2007-08 18,70,000/- 20,50,600/- 6 2010-11 9,22,100/- 10,11,100/- Total 1,62,41,866/- 1,78,10,600/- 7. On going through the chronology of events, it is manifest that the AO initiated the reassessment proceedings with the only reason that: `The assessee declared that the total investment of Rs.1,53,19,766/- has been made from the A.Y. 2005-06 to A.Y. 2008-09 and his share of investment is 25%. The matter was referred to the Valuation Officer u/s.142A of the I.T. Act. The Valuation Officer vide report dated 30-03-2011, received in this office 04-04-2011 estimated the cost of construction/investment from the A.Y. 2005-06 to A.Y. 2008-09 in the property at Rs.1,78,10,600/-’. Thereafter, the assessment orders u/s 147 were passed by the AO for all the years by noting the: “Financial year wise investment in construction declared by the assessee vis-à-vis estimates cost of investment/construction reported by the Valuation Officer’. The Tribunal in its order u/s 254(1) declared invalid the initiation of reassessment proceedings based on the report of the DVO. In the proceedings u/s 254(2) of the Act, the ld. JM opined that the reassessments on the basis of the DVO’s report were not legally initiated for the four years under consideration. The ld. AM also took note of the initiation of reassessment proceedings based on the DVO’s report only but held the same to be validly initiated because the original proceedings in the hands of the assessee were not by means of scrutiny assessments u/s 143(3) and hence the report of the DVO did not lead to change of opinion. This shows that from the stage of recording of reasons up to the difference of opinion between the ld. Members u/s 254(2), there has been no quarrel on the fact that the initiation of reassessment has been premised only on the basis of the report of the DVO. Even otherwise also, it is amply borne out that there is no reference to any other material/information in the reasons constituting a basis for initiation of the reassessment proceedings. 8. The first issue which requires my consideration is whether the report of the DVO provides bedrock for the initiation of reassessment proceedings? Both the sides have relied on certain judgments fortifying their respective points of view. I turn to such judgments in seriatim from the point of time of their rendition. The first judgment is that of the Hon’ble Summit Court in Dhariya Construction Company (SC) (supra) which was rendered on 16-02-2010 holding that the per se opinion of the DVO is not an information for the purpose of reopening assessment u/s.147 and hence, the Department was precluded from reopening the assessment only on the basis of the opinion of the DVO. This judgment supports the point of 41 view of the assessee that the solitary report of the DVO in this case cannot lead to a valid initiation of reassessment proceedings. 9. The next judgment, in the point of time is, that of the Hon’ble jurisdictional High Court in Sunder Carpet Industries (supra), which was rendered on 15-04- 2010. In this judgment, the Hon’ble jurisdictional High Court has held that reopening can be done on the basis of the Valuation report of the DVO disclosing higher valuation than that recorded in the books of account. However, it is pertinent to note that in this case, the Hon’ble High Court considered several judgments on the issue – both for and against the assessee – but preferred to go with the set of judgments, including, Bawa Abhai Singh Vs. DCIT (2002) 253 ITR 83 (Delhi) in which the validity of initiation of reassessment proceedings on the basis of DVO’s report was held to be valid. Though the judgment in Sunder Carpet Industries (supra) was rendered barely two months after the judgment of the Hon’ble Supreme Court in Dhariya Construction Company (SC)(supra), but the Apex Court judgment was neither cited nor consequently considered by the Hon’ble High Court. 10. Thereafter, this issue again came up before the Hon’ble jurisdictional High Court in Aman Cold Storage Pvt. Ltd. The Hon’ble High Court this time, vide its judgment dated 31-01-2013, considered Dhariya Construction Company (SC)(supra), and held that the AO cannot re-assess on the basis of the report of the DVO. 11. The next judgment in the point of time is that of the Hon’ble jurisdictional High Court in Sushrut Institute of Plastic Surgery (supra). It was rendered on 02- 04-2014 after considering Dhariya Construction Company (SC)(supra). In this case, the Hon’ble jurisdictional High Court upheld the validity of initiation of reassessment proceedings by observing that: “During the concerned year, the assessee’s share capital, secured loan, investment in building etc., increased but the petitioner failed to explain the source of increasement........Thus, apart from the District Valuation Officer, there are sufficient reasons for AO to believe that income chargeable to tax has escaped assessment”. It is thus discernible from this judgment that when there are other reasons with the AO, apart from the DVO’s report, which lend credence to the formation of belief about the escapement of income, then there can be no impediment in validly initiating reassessment proceedings. 12. It is befitting to note that the judgment of the Hon’ble jurisdictional High Court in Sunder Carpet Industries (supra), deciding the issue in favour of the Revenue, is based, inter alia, on Bawa Abhai Singh (Del)(supra) deciding similar issue in favour of the Revenue. The judgment of Bawa Abhai Singh (supra) once again came up for consideration before the Hon’ble Delhi High Court itself in Mahashay Chunnilal Vs. DCIT (2014) 362 ITR 314 (Delhi). The Hon’ble Delhi High Court in the latter judgment considered its earlier judgment in Bawa Abhai Singh (supra) 42 but preferred to decide the issue in favour of the assessee by relying on the judgment of the Hon’ble Supreme Court in Dhariya Construction Company (SC) (supra). 13. At this stage, it is relevant to mention that apart from the judgments relied by both the sides before the Tribunal during the proceedings u/s 254(1)/(2) of the Act, the Hon’ble jurisdictional High Court in CIT & Another Vs. Vrindavan Real Estate (P) Ltd. (2012) 254 CTR 10 (Allahabad) considered a matter in which the initiation of reassessment was based only on the report of the DVO. Following the judgment in Dhariya Construction Company (SC)(supra), which is a binding precedent under Article 141 of the Constitution of India, the Hon’ble High Court held that the per se report of the DVO was not an information for reopening assessment. 14. On a survey of the above judgments rendered by the Hon’ble Supreme Court and the Hon’ble High Courts, the position which clearly emerges is that after the advent of Dhariya Construction Company (SC)(supra), a reassessment, based solely on the DVO’s report, being, just his opinion of the investment made by the assessee, cannot be sustained as the DVO’s report, without any other material or information, does not constitute a justifiable material leading to the formation of reasons to believe about escapement of income. 15. Reverting to the facts of the extant case, it is seen from the reasons for reassessment reproduced above that the sole reason given by the AO for initiating the reassessment proceedings is the report of the DVO giving higher estimation of the cost of construction vis-à-vis that declared by the co-owners. There is no reference to any other material in the reasons for reassessment. At the cost of repetition, it is accentuated that no difference of opinion has arisen between the ld. Members on the issue that the DVO’s report was the only reason to initiate reassessment. The difference arose on the point as to whether the report of the DVO was a good reason for initiating the reassessment? Whereas the ld. JM held that initiation of reassessment on the basis of the DVO’s report was not valid for the reason that the AO had accepted the amount of investment in the hands of other co-owners in the scrutiny assessment and now basing the reassessment on the DVO’s report amounted to change of opinion, the ld. AM opined that initiation of reassessment was valid because the original assessment in this case was not made u/s 143(3) of the Act and hence it was not a case of change of opinion. 16. Section 147 at the material time provides that: `If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income ...’. It is only when the AO gets some justifiable material, on the basis of which he forms reason to believe that some income chargeable to tax escaped assessment, that he can embark upon reassessment. The essence is that there should first be some cognizable material leading to formation of belief about escapement of income. Once such a material comes up before the 43 AO, the second question arises if it is a case of change of opinion or not? If such material in the first instance itself is not acceptable as a cognizable material providing any foundation for the formation of belief about the escapement of income, then the second question of having either formed the opinion earlier or changing the opinion afterwards on the strength of such material, does not arise. To illustrate, if the AO gets some information from the Investigation wing of the Department about the assessee indulging into a clandestine transaction, then such information will constitute justifiable material for the formation of belief about the income escaping assessment. Now, if such a material was already available with the AO at the time of original assessment, which he considered but chose not to make any addition on that basis, then the AO cannot later on reopen the assessment based on such material because it would mean that though there is a justifiable material buttressing the belief about escapement of income, but considering the same material, which was earlier considered during the original assessment, would amount to change of opinion. So, the first step in the process of initiation of reassessment is that there should be some legally justifiable material with the AO supporting the formation of belief about the escapement of income. The concept of change of opinion is a second step in the sequence, which can take place only when the consequence of the first step, namely, the availability of some justifiable material, turns out to be such which was earlier considered by him in the original assessment. Thus, it is vivid that the existence of some legally justifiable material leading the AO to form belief about the escapement of income is a sine qua non before espousing the second question of change of opinion. 17. From the discussion made supra, it is graphically clear that the sole reason for the initiation of reassessment in this case is the report of the DVO. Going with the ratio decidendi of Dhariya Construction Company (SC)(supra) and others, a report of the DVO per se does not constitute a legally justifiable material for the formation of belief by the AO about the escapement of income, which is a first step in the initiation of reassessment. As such, the question of change or no-change of opinion can’t arise because the solitary report of the DVO fails to cross the hurdle of being considered as a justifiable material for reassessment. Strictly speaking, the present is not a case of `change’ or `no change’ of opinion - as neither any opinion was formed earlier because of the absence of the scrutiny assessment; nor the report of the DVO can be characterized as a justifiable material coming to the notice of the AO giving the groundwork for formation of belief about the escapement of income. 18. At this juncture, it is pertinent to note that change of opinion is not the only disability which prohibits the AO from taking action by issuing notice u/s 148. Power to reassess is circumscribed by several other factors. Seeing the wide amplitude of the question referred to the third member, which embraces the examination as to whether the order of the Tribunal u/s 254(1) of the Act is suffering from any mistake apparent on record so as to be rectified u/s 254(2), the issue of initiation of reassessment based only on change or no change of opinion 44 is not the be-all end-all of the matter. The sweeping question is whether the original order of the Tribunal requires recall/rectification in terms of section 254(2) of the Act. Even otherwise, the question as to whether or not the report of the DVO is a cognizable material for initiation of reassessment is just another aspect of the larger question as to whether or not the consideration of the report of the DVO amounts to change of opinion so as to initiate reassessment. Viewed in this hue, it is held that the initiation of reassessment is invalid absent any foundation because the solitary report of the DVO, without anything else, cannot lead to formation of belief by the AO about any escapement of income. Ex consequenti, the question posed for my consideration is answered in negative by opining that on the facts and in the circumstances of the case, the order of the Tribunal dated 30-04-2015 is not suffering from any mistake apparent on record so as to be rectified under section 254(2) of the Income Tax Act. Ergo, I agree with the conclusion drawn by the ld. JM. 19. Before parting, I consider it as my duty to mention that the ld. AR heavy harped on the factual aspects of the matter to contend that the assessee in question did not contribute towards the construction cost as was duly intimated to the AO during the assessment proceedings of Sh. Ashok Sachdeva by giving details of total investment amounting to Rs.1.53 crore financed by a loan of Rs.98.17 lakh obtained from the Punjab National bank and the remaining amount coming from the other three co-owners, namely, Shri K.L. Sachdeva, Shri Ashok Kumar Sachdeva and Shri Anil Kumar Sachdeva. Referring to a letter addressed by Sh. Ashok Sachdeva to the AO during the course of proceedings for the A.Y. 2008-09, a copy placed at page 41 of the Departmental paper book, he submitted that Smt. Chand Rani albeit did not make any investment in the cost of construction but undertook to repay a part of loan taken from PNB. In the hue of these facts, it was contended that there was no scope for making any addition towards cost of construction in her hands. The ld. DR strongly opposed to the contention by submitting that the factum of the assessee having not invested anything in the cost of construction neither in the orders of the AO/CIT(A) nor the order of the Tribunal. 20. Suffice to say, my jurisdiction as a third member is confined only to the difference of opinion between the ld. Members and, as such, I refrain from adjudicating on any aspect other than that, including the factual panorama now brought to my notice by the ld. AR, which is neither the subject matter of the orders of the authorities below or the order of the Tribunal u/s 254(1) or the opinions of the ld. Members u/s 254(2) of the Act. 21. The Registry of the Tribunal is directed to list this matter before the Division Bench for passing an order in accordance with the majority view.” 3. Thus, the Hon'ble Third Member has concurred with the view of the Judicial Member and thereby as per the majority view, it is held that the order 45 of the Tribunal dated 30.4.2015 is not suffering from any mistake apparent from record so as to rectify under section 254(2) of the Income Tax Act. As per the majority view, the Misc. Applications filed by the Revenue deserve dismissal. We order accordingly. 4. In the result, the Misc. Applications in M.A. Nos. 06 to 09/Alld/2015 in ITA Nos. 626 to 629/Alld/2014 are dismissed. Order pronounced on 16.09.2022 on conclusion of hearing at Allahabad, U.P. Sd/- Sd/- (RAMIT KOCHAR) (VIJAY PAL RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER Allahabad Dated: 16/09/2022 Sh Copy forwarded to: 1. The Appellant-The Income Tax Officer, Ward 1(1), Allahabad, U.P. 2. The Respondent-Mrs. Chand Rani through Legal heir Mr. Anil Kumar Sachdeva, 5-B.N.K. Mukherji Road, Allahabad, U.P. 211001 3. The CIT(A)-Allahabad 4. The CIT-Allahabad 5. The Sr. DR, I.T.A.T. 6. Guard File By Order (I.T.A.T., Allahabad) True copy