2003-VIL-190-ITAT-LCK

Equivalent Citation: TTJ 088, 913,

Income Tax Appellate Tribunal LUCKNOW

Date: 08.10.2003

INCOME TAX OFFICER.

Vs

SMT. PRAMILA AGARWAL.

BENCH

Member(s)  : PHOOL SINGH., MOHAN SINGH.

JUDGMENT

These three appeals of the Department are directed against the order dt. 13th June, 1996 recorded by the CIT(A)-II, Lucknow, by which appeals of the assessee involving asst. yrs. 1988-89, 1989-90 and 1990-91 were disposed of.

2. The only controversy involved in these three appeals relates to the addition made by the AO on account of undisclosed investment in the construction of house property. It appears that the assessee constructed a house on plot No. A-1/4, Sector ‘B’, Aliganj, Lucknow, in the relevant period of asst. yrs. 1988-89 to 1990-91 and had shown the amount of investment of Rs. 14,053 in asst. yr. 1987-88 and Rs. 1,78,380 in asst. yr. 1988-89, Rs. 2,82,020. In 1989-90 and Rs. 2,62,730 in asst. yr. 1990-91 and total thereof was Rs. 7,37,183. Assessments were completed in respect of the asst. yrs. 1988-89 to 1990-91, but the AO made a reference to DVO for working out the cost of construction of the house raised by the assessee on the above referred to plots. The District Valuation Officer had estimated the total investment in the construction of the property at Rs. 11,96,400 and bifurcation of this investment allowance to the various years is as under:

3. The assessment for these three assessment years before us were reopened by issuing a notice under s. 148 of the Act and the AO had given some relief to the assessee on certain points, but on the basis of the reports submitted by the Valuation Officer of the Department, the following additions were made in respect of the following assessment years:

4. The assessee, being aggrieved, preferred three appeals before the CIT(A), who decided all the three appeals by the composite order and extended the relief against which the Department had preferred these three appeals.

5. The order of AO and learned CIT(A) shall reveal that the addition made by the AO were solely based on the report of the valuation officer of the Department and on merit, the learned CIT(A) noted that in asst. yr. 1989-90, the AO made an addition of Rs. 1,75,680, which was difference between Rs. 4,97,700 as estimated by the Valuation Officer and Rs. 2,82,020 as disclosed by the assessee, but in asst. yr. 1990-91, the addition on the same principle should have been Rs. 1,63,670, but the AO made an addition of Rs. 98,825, because the AO accepted that the appellant must have obtained the material for raising construction at a cheaper rate, because she belonged to a family of contractors. Further it was noted by the CIT(A) that the AO has allowed the benefit of Rs. 40,000 on this account as against claim of Rs. 63,436 raised by the assessee. The DVO had worked out the fee of architect at Rs. 34,845 as against an amount of Rs. 3,000 claimed by the assessee and the AO without any basis had estimated the amount of fee paid to architect at Rs. 10,000. The assessee also asserted as noted by the learned CIT(A) that Rs. 19,737 were withdrawn by her from M/s Syntho Pharmaceuticals (P) Ltd. on 8th Nov., 1989, which were spent for the construction of house property, but due to mistake the amount was not included in the figure of investment. The other plea was that amount of Rs. 1,15,000 was also withdrawn from M/s Syntho Pharmaceuticals (P) Ltd. on 12th Jan., 1992 and 20th Jan., 1992 and the same was invested in the construction of the house property and the said investment was duly disclosed in the wealth-tax return filed by her. The AO was not justified to treat that amount as afterthought version of the assessee. The learned counsel allegedly had argued before the learned CIT(A) that the Departmental Valuation Officer had estimated the value of marble at Rs. 2,93,979, while the assessee had claimed the cost of marble at Rs. 59,206 for which necessary vouchers of purchase of marble from concerned parties were filed and the amount of fixation was also shown separately. The assessee’s valuer had worked out the amount of Rs. 99,447 on account of cost of marble and its fixation. The contention on the basis of these facts was that in case the assessee’s version is believed, then difference of Rs. 58,105 as the valuation arrived at by the DVO has to be at Rs. 9,30,032 and the assessee had shown the cost of construction at Rs. 8,78,988 and this will be less than 6 per cent and such difference is ignorable. The learned CIT(A) decided the issue in favour of the assessee by noting as under :

"6. I have carefully considered the submissions raised on behalf of the appellant and in view of the fact that the appellant is able to prove her contentions regarding the lesser amount spent in the fixation of marbles, I do not see any reason as to why her claim for deduction of Rs. 1,94,532 should be rejected. Similarly, when the appellant is able to furnish the necessary certificates from the architect that he charged only an amount of Rs. 3,000, there is no reason for resorting a higher estimation of Rs. 34,845 by the Valuation Officer or Rs. 10,000 by the AO. Similarly, when the appellant is in a position to prove that the amount of Rs. 19,737 were also paid to Agarwal Hardware Stores, Kanpur, for purchase of building material, there is no reason to reject her claim that this much amount was also invested in the construction of the house property. Further I do not see any reason in rejecting the appellant’s claim that she invested a further amount of Rs. 1,15,000 in financial year 1991-92 in the construction of the property. It is pertinent to note that Departmental Valuer inspected this property only in the month of April, 1992, i.e., when the amount had already been invested and was certainly influenced by this investment in estimating the value of the property. As the return for the asst. yr. 1992-93 were due after 12th April, 1992 the appellant could not have filed the same earlier and therefore the AO is not correct in drawing the conclusion that this declaration of further investment of Rs. 1,15,000 is an afterthought. If all these points are taken into consideration, the difference between the correct investment in the property and investment disclosed by the appellant is only 6.25 per cent and such a difference can be certainly on account of genuine difference of opinions. I, therefore, delete the additions of Rs. 1,11,200, Rs. 1,75,680 and Rs. 98,825 made by the AO in asst. yrs. 1988-89, 1989-90 and 1990-91 respectively."

6. The learned senior Departmental Representative had placed reliance on the report of the Valuation Officer and submitted that all the objections raised by the assessee against the valuation report of Department had been discussed at length and rightly rejected by the AO. The assessee was not able to prove her version about the cost of construction and additions should have been made.

7. As against it, the learned counsel for the assessee submitted that on merits also, the learned CIT(A) has rightly appreciated the factual position. The amount of Rs. 1,15,000 was duly returned by her in wealth-tax return for asst. yr. 1992-93 and the AO was not justified to treat this amount as afterthought version, because the due date for filing of the return was not yet over. The learned counsel for the assessee also submitted that there is difference between the amount of marble and its fixation in detail in the report of the DVO and that of Valuation Officer of the assessee, but the case of the assessee is fully supported by the copies of the purchases of marble, which are appearing at pp. 30 to 32 of the paper book along with copy of Form No. 31 issued by the ST Department for getting the marble from Makrana. All these documents were submitted before the AO vide letter dt. 21st March, 1996, copy of which is appearing at page No. 27 of the paper book. The receipt issued by Shri P.L. Mallik, architect is for Rs. 3,000 and the AO was not justified to ignore this and in case he was having any doubt, he should have summoned the architect for cross-examination. The other plea of the learned counsel for the assessee is that the assessee’s family members are dealing in contract business and having brick kiln. The assessee was able to get bricks, cement, iron etc. at very cheaper rates for which the AO himself has allowed the benefit of Rs. 40,000 in one year and such benefit should have been given in respect of all the assessment years. The contention is that in case the amount shown by the assessee are included, then the difference in between the amount of construction returned by the assessee and the amount of investment in the construction as estimated by the DVO will be less than 10 per cent and the Tribunal, Lucknow Bench in the case of Dy. CIT vs. Janki Prasad Garden Enclave (P) Ltd. in ITA No. 54/All/1999 had decided vide order dt. 28th Feb., 2003 and held that, if difference is less than 10 per cent in valuation made by the valuation expert and amount of investment returned by the assessee, then such difference is to be ignored. The case law has also been cited and the copy of that order is appearing in pp. 2-4 of his paper book-I. On the basis of this, the learned counsel argued that the valuation returned by the assessee was correct and no justification for making additions, which have rightly been deleted by the learned CIT(A).

8. During the course of argument, the learned counsel also moved an application to seek permission of the Bench to argue the following ground:

"The learned AO erred on facts and in law in making a reference to the Departmental Valuation Officer under s. 131(1)(d) of the IT Act, 1961, in the present case for determining the cost of construction of the property as against that disclosed, for the purpose of making an assessment of the appellant’s income for the present year and hence the addition so made on the basis of the DVO’s report obtained under s. 131(1)(d) is bad in law and so be ordered to be deleted."

9. It was submitted that Hon’ble Gauhati High Court in the case of Assam Company (I) Ltd. vs. CIT (2002) 176 CTR (Gau) 406 : (2002) 256 ITR 423 (Gau), had laid down that it is permissible on the part of the Tribunal to entertain a ground beyond those incorporated in the memorandum of appeal though the party urging the said ground had neither appealed before it nor had filed a cross-objection in the appeal filed by the other party. This application was contested and we rejected the ground as it was not pointed out by the learned counsel for the assessee as to where this ground is to be included, but learned counsel for the assessee was allowed to argue during the course of argument. In compliance of this, the learned counsel for the assessee placed reliance on the decision of the Hon’ble Supreme Court of India in the case of Smt. Amiya Bala Paul vs. CIT (2003) 182 CTR (SC) 489 : (2003) 262 ITR 407 (SC) in which the apex Court has laid down that the AO was not competent to call for the report from the Valuation Officer under s. 131(1)(d) of the IT Act, 1961. The learned counsel for the assessee submitted that the report of the DVO shall reveal that he has submitted the report when reference under s. 133(1) of the Act was made to him by the Valuation Officer and, thus, the addition is not warranted.

10. The learned Senior Departmental Representative tried to meet this plea and submitted that it is a case of reopening and report of DVO can be used as the piece of evidence, even though the AO has no jurisdiction to make a reference under s. 131(1)(d) of the Act. In reply to this, learned counsel for the assessee submitted that if the AO has no jurisdiction to call for the report, then such report cannot be relied upon for making addition and for that learned counsel referred to the decision of Tribunal Nagpur Bench, in the case of Dr. Arjun D. Bharad vs. ITO (2003) 78 TTJ (Nag) 832, in which it was laid down that if the AO had exercised power under s. 131(1) of the Act, without any proceedings pending before him, then such report is not admissible and the AO has no jurisdiction to make reference without application of the mind in respect of the account books of the assessee. The learned counsel submitted that the AO has not pointed out any defect in the books of the assessee and, thus, the AO was having no jurisdiction to issue the commission to DVO for making estimate of investment in the construction of the house.

11. We have carefully considered the facts and circumstances of the case, the case laws to which our attention was invited and the rival submissions. So far as the legal position is concerned, the Hon’ble Supreme Court of India in the case of Smt. Amiya Bala Paul vs. CIT, has laid down that the Valuation Officer appointed under the Wealth-tax Act, 1957, can discharge functions within the statutory limits under which he is appointed. It is not open to a Valuation Officer to act in his capacity as Valuation Officer otherwise than in discharge of his statutory functions. It is also laid down that the Valuation Officer cannot be called upon nor would be having jurisdiction to give a report to the AO under the IT Act, except when a reference is made under and in terms of s. 55A or to a competent authority under s. 269L of the Act. If this reasoning is applied to the facts of the case, then the AO has no jurisdiction to call for the report from the DVO and DVO has no jurisdiction to estimate the cost of construction under s. 131(1)(d) of the Act. The report is, therefore, inadmissible nor can be looked into.

12. The other legal point involved is that the AO has nowhere pointed out as to why he was making a reference. The assessee had filed copy of accounts showing the cost of construction, which are appearing at pp. 36 to 40 of the paper book in respect of all the assessment years. The AO should have applied his mind to the facts mentioned in the accounts of the assessee and should have pointed out the defects, then only he may be having jurisdiction, though as per apex Court, he was not having such jurisdiction. The AO has not applied his mind and has not pointed out any defect in the accounts of the assessee and, thus, the AO was not having any jurisdiction to issue commission to DVO.

13. On merits also, we have reproduced the arguments of the assessee as well as the view taken by the learned CIT(A). We are in agreement with the view taken by the learned CIT(A) and his findings are elaborate and are based on the basis of material, which was already before the AO and it is wrong on the part of the Department that the additional ground has been admitted by the CIT(A). Learned Senior Departmental Representative was not able to refer any findings, which was admitted by the learned CIT(A) at his own level. Under these circumstances, we are of the view that difference, even if there was any, it was less than 10 per cent as held by the Bench in the case of Janki Prasad Garden Enclave (P) Ltd., the difference less than 10 per cent has to be ignored. Under these circumstances, the order of the learned CIT(A) requires no interference and all the appeals are liable to be dismissed.

14. In the result, all the appeals of the Department are dismissed.

 

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