2007-VIL-335-ITAT-JAI
Equivalent Citation: TTJ 117, 542, [2009] 28 SOT 29 (JP.) (URO)
Income Tax Appellate Tribunal JAIPUR
IT APPEAL NO. 455 (JP) OF 2004
Date: 31.05.2007
INCOME TAX OFFICER.
Vs
AGENCIES RAJASTHAN (P) LIMITED.
BENCH
Member(s) : I. C. SUDHIR., B. P. JAIN.
JUDGMENT
The Revenue has questioned first appellate order on the grounds that the learned CIT(A) has erred in holding that :
1. reference to DVO was not legal in view of decision of Hon'ble Supreme Court in the case of Smt. Amiya Bala Paul and thereby deleting addition of Rs. 24,25,363 made under section 69 on account of undisclosed investment in the property;
2. reference to DVO was not legal ignoring the proposed amendments in section 142A retrospectively with effect from 15-11-1972; and
3. the Assessing Officer was not right in adopting CPWD rates and to adopt PWD rates.
2. We have heard and considered the arguments advanced by the parties in view of orders of the lower authorities and the decisions relied upon by them.
Ground Nos. 1 to 3
3. The relevant facts are that the assessee had filed its return of income on 23-12-1992 at nil. Initially, the assessment was completed under section 143(3) on 23-3-1998 on the total income of Rs. 30,69,850. During the year, the assessee had constructed a property, known as 'Nandan Apartment'. The Assessing Officer made a reference under section 131(1)(d) to the DVO to estimate the cost of construction of building of Nandan Apartment. The DVO, vide his report dated 29-3-1994, estimated the cost of construction of the building at Rs. 62,85,000 as against declared, expenditure of Rs. 32,13,146. Since the assessee had failed to explain the difference, the Assessing Officer made addition of Rs. 30,71,854 as income of the assessee from undisclosed sources. The learned CIT(A), vide order dated 25-2-1999, had set aside the assessment to frame the assessment order de novo after allowing adequate opportunity to the assessee. He also directed to re-examine the issue of spread over of estimated cost and to consider all objections of the assessee to DVO's report. The Assessing Officer, vide order dated 29-3-2001, has completed the assessment under section 143(3)/250 of the Act making addition of Rs. 24,26,363 on the basis of DVO's report. The assessee again went in first appeal. The learned CIT(A), vide order dated 4-6-2004, has deleted the addition, against which the Revenue is in appeal before the Tribunal.
4. In support of the grounds, the learned Departmental Representative submitted that the Assessing Officer had rightly referred the matter to the DVO for estimation of cost of construction of the building in question and, in view of decision of Hon'ble Supreme Court in the case of Pooran Mal v. Director of Inspection (Inv.) [1974] 93 ITR 505, there was no prohibition on Assessing Officer to use the material gathered by him in an illegal proceeding for making assessment. Thus, the report of the DVO, even if it was held illegal, was rightly used by the Assessing Officer. The learned Departmental Representative also referred provisions of section 142A of the Act with this submission that it has come into effect retrospectively from 10-11-1972 with this exception that the provisions shall not apply in respect of an assessment made on or before 30th day of September, 2004 and where such assessment has become final and conclusive on or before that date except in cases where reassessment is required to be made in accordance with the provisions of section 153A. The learned Departmental Representative submitted that issue raised in the present grounds is fully covered in favour of the Revenue in the case of ITO v. Brothers (P.) Ltd. decided by this Bench of the Tribunal on 31-1-2007 vide IT Appeal No. 80 (Jp.) 2005, wherein it was held that when first appellate order was pending, the assessment order dated 4-3-2002 had not reached its finality as per section 142A on or before 30-9-2004. It has been further held in this case that Asstt. Director of IT (Inv.) is also an Assessing Officer to make reference to DVO. In this regard, the Tribunal has taken support of the decision of Peerless General Finance & Investment Co. Ltd. v. Assessing Officer [2001] 248 ITR 113 (All) followed in Reckitt Colman of India Ltd. v. Asstt. CIT [2001] 252 ITR 550 (Cal). In these decisions, it has been held that the expression 'Assessing Officer' in section 2(7A) is not confined to the Assessing Officer making the regular assessment but includes others also who may come within the purview of section 2(7A).
5. On merits of the case, the learned Departmental Representative submitted that the learned CIT(A) was not justified in coming to the conclusion that the DVO has wrongly applied CPWD rates while determining the cost of construction. He submitted that even CPWD rates can be applied if it takes care of PWD rates.
6. The learned Authorised Representative, on the other hand, justified the first appellate order with assertion that there was no pendency of assessment proceedings when reference under section 131(1)(d) was made by the Assessing Officer to the DVO. He informed that return was filed on 23-12-1992, which was processed on 27-3-1993. Reference to the DVO was made in January, 1994 vide letter No. 702, whereas the assessment for assessment year 1991-92 stood completed in December, 1993. The proceedings for assessment year 1992-93 under consideration were firstly completed under section 143(1)(a) on 27-7-1993. The action under section 148 was taken long thereafter vide notice dated 6-7-1995. Thus, as on the day when the reference was made to the DVO, there were no proceedings at all pending before the Assessing Officer so as to issue commission under section 131(1)(d) of the Act. The learned Authorised Representative submitted that prescribed time-limit for issuance of notice under section 143(2) for scrutiny was expired on 30-12-1993, whereas reference was issued in January, 1994. He placed reliance on the following decisions :
(1) Punjab Tractors Ltd. v. Jt. CIT [2002] 254 ITR 242 (Punj. & Har.);
(2) Vipan Khanna v. CIT [2002] 255 ITR 220 (Punj. & Har.);
(3) CIT v. Krishan Lal Dua [2005] 277 ITR 477 (P&H);
(4) Smt. Amiya Bala Paul v. CIT [2003] 262 ITR 407 (SC).
(5) Brig. B. Lall v. WTO [1981] 127 ITR 308 (Raj).
7. On merits, the learned Authorised Representative submitted that when books of accounts were maintained, no specific defect was pointed out nor the books were rejected, there was no occasion for making reference by the Assessing Officer to DVO. He referred page Nos. 191 to 195 of the paper book in this regard. He submitted further that the assessee is a limited company being assessed for the last 30 years. Its accounts are audited. He also referred page Nos. 8, 10, 15, 172, 188, 208, 209, 222, 253, 253A etc. of the paper book with this submission that year-wise chart of purchase material etc. were furnished and assessee was also in correspondence with the DVO. Several defects in the report of DVO were pointed out that, even the correct measurement was not taken by the DVO, which was physically verified and the objection of the assessee in this regard was found correct on inspection by the learned CIT(A). The DVO had worked out the cost at Rs. 62,85,000, whereas the Assessing Officer, after taking into account the objection raised by the assessee, had valued the property at Rs. 56,39,509. The learned Authorised Representative placed reliance on the following decisions on the merits of the valuation :
(1) Sarwanpal Singh Kanda v. ITO 21 Tax World 393 (Jp);
(2) CIT v. Hotel Joshi [2000] 242 ITR 478 (Raj.);
(3) CIT v. Ganesh Rice Mills [2005] 145 Taxman 452 (Punj. & Har.).
(4) Dy. CIT v. Shakti Enterprises (P) Ltd. [2005] 97 TTJ (Jd.) 426;
(5) Peerless General Finance & Investment Co. Ltd.
8. Considering the arguments advanced by the parties, we find substance in the submission of the learned Authorised Representative to this extent that for the month of January, 1994, when the reference was made by the Assessing Officer to the DVO for determining the cost of construction of the property, the assessment for assessment year 1992-93 was not pending. There is no dispute on these material facts that return of income was filed on 23-12-1992, which was processed under section 143(1)(a) on 27-7-1993. The prescribed time-limit of 12 months for issuance of notice under section 143(2) was also expired on 30-12-1993. Thus, during the month of January, 1994, when reference was made to the DVO, the assessment proceedings for the year under consideration were not pending. Even the action under section 148 was taken long thereafter vide notice dated 6-7-1995. In the case of Brig. B. Lall, the Hon'ble jurisdictional High Court in the matter of reference of section 16A of the With-tax Act, wherein also the similar expression "for the purpose of making an assessment for valuation" is there has held that the very reference and the valuation report also were non est as there was no purpose of making reference once the assessment was already completed. The Hon'ble Rajasthan High Court has again expressed the similar view in the case of CWT v. R.L. Kasliwal [1995] 211 ITR 153. The Hon'ble Madhya Pradesh High Court in the case of Prakash Chand v. Dy. CIT [2004] 269 ITR 260 held that reference made to the Valuation Officer after the completion of assessment was invalid. We, thus, concur with the view of the learned CIT(A) in this regard that when assessment proceedings were not pending for the year in the present case, the Assessing Officer was not justified in making reference to the DVO to determine the cost of construction, hence the reference was invalid and, thus, the report furnished by the DVO. The first appellate order in this regard is, thus, upheld.
9. So far as the other submission of the learned Authorised Representative that the assessment order in the present case has reached its finality before 30-9-2004 as per the provisions of section 142A of the Act is concerned, we do not agree with him, because under the wordings of proviso to section 142A inserted by the Finance (No. 2) Act, 2004 with retrospective effect 15-11-1972 is very much clear. For a ready reference, the same is reproduced hereunder :
"142A. Estimate by Valuation Officer in certain cases.—(1)...
Provided that nothing contained in this section shall apply in respect of an assessment made on or before the 30th day of September, 2004, and where such assessment has become final and conclusive on or before that date, except in cases where a reassessment is required to be made in accordance with the provisions of section 153."
10. This Bench of the Tribunal in the case of Brothers (P.) Ltd. had an occasion to deal with the issue. The Tribunal held that two requirements are there for non-application of the above provisions laid down under section 142A. Firstly, the assessment has been made on or before 30-9-2004 and, secondly, such assessment has become final and conclusive on or before that date.
11. In the present case before us, admittedly, assessment under section 143(3) was initially made on 23-3-1998. Thus, the aforesaid first condition has been satisfied. So, far as second condition that assessment has become final and conclusive on or before 30-9-2004 is concerned, is not satisfied in the present case, as admittedly, the first appellate order, which has ultimately and finally been passed on 4-6-2004, has not yet reached finality, since the same has been questioned before the Tribunal. Since the Tribunal is facts finding authority the assessment order cannot be said to have reached its finality. We, thus, do not concur with the decision of the first appellate authority on the issue that the reference to DVO could not have been made to DVO by the Assessing Officer. However, this finding has become academic only in view of aforesaid finding that in absence of pendency of assessment proceedings, the Assessing Officer was not justified in making reference to the DVO for determination of the cost of construction.
12. So far as merit of the case is concerned, we find substance in the submission of the learned Authorised Representative that without pointing out specific defects in the books of account or rejecting the books of account, reference could not be made by the Assessing Officer to the DVO for determination of cost of construction. Even otherwise, we find that there were certain defects in the report of the DVO, which have been observed by the learned CIT(A) in para No. 8.2 of the first appellate order. He has noted that his predecessor had made an attempt to verify the plinth area of the spot and found that DVO had adopted higher plinth area than measured on the spot by his predecessor. Even the Assessing Officer had not accepted the valuation of the property at Rs. 62,85,000 determined by the DVO and after considering several objections of the assessee to the report, he had arrived at the figure of Rs. 56,39,509. In view of the decision of Hon'ble Rajasthan High Court in the case of CIT v. Pratapsingh Amrosingh Rajendra Singh v. Deepak Kumar [1993] 200 ITR 788 (Raj.) and the decisions of Jaipur Bench of the Tribunal in the cases of Smt. Rekha Devi v. Asstt. CIT [1994] 49 TTJ (Jp.) 530 and Bhanwar Lal Solanki IT Appeal No. 669 (Jp.) of 1994 dated 21-6-1996, the learned CIT(A) has taken the view that the local PWD rates should be applied as against CPWD rates while working out the value of the property in question. Thus, even on the merits of the case, the learned CIT(A) has decided the issue in favour of the assessee with this observation that expenditure should have been spread over in different years as construction was made in more than one year. The first appellate order is, thus, upheld. The grounds are, thus, decided accordingly.
3. In result, the appeal is dismissed.
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