M/s. Suresh Chandra Gupta HUF, Lucknow v. ITO, Lucknow

ITA 122/LKW/2011 | 2000-2001
Pronouncement Date: 21-03-2011

Appeal Details

RSA Number 12223714 RSA 2011
Bench Lucknow
Appeal Number ITA 122/LKW/2011
Duration Of Justice 6 day(s)
Appellant M/s. Suresh Chandra Gupta HUF, Lucknow
Respondent ITO, Lucknow
Appeal Type Income Tax Appeal
Pronouncement Date 21-03-2011
Appeal Filed By Assessee
Bench Allotted SMC
Date Of Final Hearing 21-03-2011
Next Hearing Date 21-03-2011
Assessment Year 2000-2001
Appeal Filed On 15-03-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL: LUCKNOW BENCH SMC LUCKNOW (BEFORE HONBLE SHRI H. L. KARWA VICE PRESIDENT) ITA NO.122 123 AND 124/LKW/2011 ASSESSMENT YEARS:2000-1 2002-03 AND 2003-04 M/S SURESH CHANDRA GUPTA HUF L-II 71-G LDA COLONY KANPUR ROAD LUCKNOW V. ITO RANGE IV(2) LUCKNOW (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI. K. R. RASTOGI C.A RESPONDENT BY: SHRI. ANADI VERMA D.R. O R D E R THESE THREE APPEALS BY THE ASSESSEE INVOLVING COMM ON ISSUES ARE DIRECTED AGAINST THE SEPARATE ORDERS OF THE CIT(A)- II LUCKNOW DATED 7.1.2011 RELATING TO ASSESSMENT YEARS 2000-01 2002 -03 AND 2003-04. 2. THE FIRST COMMON GROUND OF ALL THE THREE APPEALS RE AD AS UNDER:- (1) THE LD. CIT(A)-II LUCKNOW ERRED ON FACTS AND IN LAW IN CONFIRMING THE ISSUANCE OF NOTICE U/S 148 OF THE I. T. ACT AND ASSESSMENT U/S 144/147 OF I.T. ACT AS VALID INSPIT E OF THE FACT SAID NOTICE WAS ISSUED ONLY ON THE BASIS OF DVOS R EPORT. 3. THE FACTS AND GROUNDS OF ALL THE THREE APPEALS ARE IDENTICAL EXCEPT THE AMOUNT OF ADDITION. I THEREFORE TAKE THE FAC TS FROM ITA NO.122/LKW/2011 FOR THE SAKE OF CONVENIENCE. ITA NO.122/LKW/2011: 4. FOR ASSESSMENT YEAR 2000-01 THE ASSESSEE FILED ITS RETURN IN THE MONTH OF MARCH 2002 SHOWING INCOME OF `2 403 FROM OTHER SOURCES. THE CASE WAS REOPENED AND NOTICE U/S. 148 OF THE IN COME-TAX ACT 1961 (IN SHORT THE ACT) DATED 19.2.2007 WAS ISSUE D AND SERVED UPON THE ASSESSEE. IN COMPLIANCE TO THE NOTICE TH E ASSESSEE PRODUCED WRITTEN REPLY DATED 14.3.2007 ALONG WITH C OPY OF RETURN. :-2-: THEREAFTER NOTICE U/S. 143(2) OF THE ACT WAS ISSUE D TO THE ASSESSEE. IN COMPLIANCE TO THE NOTICE THE ASSESSEE FILED WRI TTEN REPLY ON 1.5.2007 REQUESTING THAT THE ASSESSMENT PROCEEDINGS MAY BE KEPT IN ABEYANCE TILL THE FINAL DISPOSAL OF APPEAL RELAT ING TO THE ASSESSMENT YEAR 2004-05. THEREAFTER NOTICE U/S. 14 3(2) OF THE ACT DATED 4.9.2007 WAS ISSUED. ACCORDING TO THE ASSESS ING OFFICER NEITHER ANYONE ATTENDED NOR ANY WRITTEN SUBMISSION WAS FILED. AGAIN NOTICE U/S. 143(2) OF THE ACT DATED 4.9.2007 WAS ISSUED FIXING THE DATE OF HEARING FOR 21.9.2007. AGAIN NO COMPLI ANCE WAS MADE. FURTHER NOTICE U/S. 143(2) OF THE ACT DATED 31.10. 2007 WAS ISSUED FIXING THE DATE OF HEARING FOR 13.11.2007. AGAIN N EITHER ANYONE ATTENDED NOR ANY WRITTEN SUBMISSION WAS FILED IN TH IS REGARD. FINALLY A SHOW CAUSE NOTICE U/S. 144 OF THE ACT WA S ISSUED ON 20.11.2007. AGAIN NO COMPLIANCE WAS MADE. THEREFO RE THE ASSESSING OFFICER FRAMED THE ASSESSMENT U/S. 144/14 7 OF THE ACT STATING THAT THE ASSESSEE HAS DERIVED INCOME FROM O THER SOURCES. THE CASE WAS REOPENED U/S. 148 OF THE ACT WITH THE REASON THAT THE ASSESSEE HAD INVESTED `3 68 205 IN FINANCIAL YEAR 1 999-2000 IN CONSTRUCTION OF SHOPPING COMPLEX-CUM-SCHOOL BUILDIN G AT PREM PLAZA COMPLEX SECTOR G LDA COLONY KANPUR ROAD LUCKNOW . THE MATTER WAS REFERRED U/S. 142A OF THE ACT TO THE DVO TO ASC ERTAIN THE VALUE OF INVESTMENT. FOR ASSESSMENT YEAR 2000-01 THE DV O ESTIMATED THE COST OF CONSTRUCTION IN BUILDING AT `4 78 117 A S AGAINST THE COST OF CONSTRUCTION OF `3 68 205 SHOWN BY THE ASSESSEE. ACCORDING TO THE ASSESSING OFFICER THE DIFFERENCE AMOUNTING TO `1 09 912 HAD ESCAPED ASSESSMENT FOR ASSESSMENT YEAR 2000-01. HE NCE THE ASSESSING OFFICER MADE ADDITION OF `1 09 912 VIDE A SSESSMENT U/S. 144/147 OF THE ACT DATED 17.12.2007. 5. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER TH E ASSESSEE CARRIED THE MATTER IN APPEAL TO THE LD. CIT(A). BE FORE THE LD. CIT(A) THE ASSESSEE HAS TAKEN THE FOLLOWING ADDITIONAL GRO UNDS OF APPEAL:- :-3-: I) THE ASSESSING OFFICER ERRED ON FACTS AND IN LAW IN ISSUING NOTICE U/S. 148 OF THE ACT SOLELY ON THE BASIS OF VALUATION REPORT. II) THE ASSESSING OFFICER HAS NOT RECORDED SATISFACTION BEFORE ISSUING NOTICE U/S. 148 OF THE ACT. 5.1 THE MAIN CONTENTION OF THE ASSESSEE BEFORE THE LD. CIT(A) WAS THAT THE ASSESSING OFFICER HAS NOT APPLIED HIS MIND OR C OLLECTED ANY EVIDENCE/INFORMATION IN SUPPORT OF HIS BELIEF EXCEP T SOLELY RELYING ON THE REPORT OF THE DVO. IN SUPPORT OF THE ABOVE CONTENT ION THE ASSESSEE RELIED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT V. DHARIYA CONSTRUCTION CO. REPORTED IN 328 ITR 515 (SC). 5.2 HOWEVER THE LD. CIT(A) REJECTED THE CONTENTION OF THE ASSESSEE OBSERVING AS UNDER:- 3. AS REGARD ADDITIONAL GROUND NOS. 1 AND 2 AT TH E OUTSET A COPY OF ADDITIONAL GROUNDS OF APPEAL WERE SENT TO THE ASSES SING OFFICER BUT NO COMMENTS HAVE BEEN RECEIVED FROM THE ASSESSING OFFI CER. THE FACTS OF CASE ARE THAT THE RETURN OF INCOME OF THE ASSESSMENT YEA R 2000-01 SHOWING NIL INCOME WAS FILED BY THE APPELLANT IN THE MONTH OF M ARCH 2002 WHICH IS A BELATED RETURN. THE RETURN OF INCOME WAS ACCEPTED U NDER SECTION 143(1) AND THE RECORDS SHOW THAT NO SCRUTINY ASSESSMENT UNDER SECTION 143(3) WAS MADE IN THE CAPTIONED ASSESSMENT YEAR. THE APPELLAN T FILED THE RETURN OF INCOME OF A.Y. 2004-05 ON 31.10.2004. THE APPELLANT CONSTRUCTED THE AFORESAID SHOPPING COMPLEX BETWEEN THE PERIOD FROM F.Y. 1997-98 AND 2006-07. DURING THE COURSE OF ASSESSMENT PROCEEDING S OF A.Y. 2004-05 THE APPELLANT HAD FILED VALUATION REPORT DATED 10.04.20 05 OF REGISTERED VALUER. THE ASSESSING OFFICER HAD NOTICED SOME DISCREPANCIE S IN THE VALUATION REPORT OF THE REGISTERED VALUER AND THEREFORE REFERRED TH E PROPERTY TO THE DEPARTMENTAL VALUATION OFFICER ON 13.09.2006 BY INV OKING THE PROVISIONS OF SECTION 142A OF THE I.T. ACT 1961 FOR VALUATION. T HE DVO AFTER AFFORDING :-4-: SUFFICIENT OPPORTUNITY OF BEING HEARD AND TO PRODUC E ALL THE DOCUMENTS/ BILLS & VOUCHERS RELATING TO THE COST OF CONSTRUCTION OF PROPERTY HAD SUBMITTED THE VALUATION REPORT ON 15.11.2006. WHEN THE APPEL LANT MADE SOME OBJECTIONS IN RESPECT OF VALUATION OF PROPERTY THE MATTER WAS REFERRED TO THE DVO FOR EXAMINATION. THE DVO AFTER EXAMINING THE OB JECTIONS OF THE APPELLANT HAD SUBMITTED HIS REVISED VALUATION REPOR T ON 15.12.2006. THE DVO IN HIS VALUATION REPORT HAS FOUND THE YEAR-WISE ESTIMATED COST OF CONSTRUCTION AS UNDER:- PERIOD (F.Y) YEARWISE INVESTMENT DECLARED BY APPELLANT (IN RS.) ESTIMATED YEARWISE INVESTMENT (IN RS.) DIFFERENCE FOUND (IN RS.) 1997-98 1 71 710 2 39 377 67 667 1998-99 8 07 304 10 91 838 2 84 534 1999-2000 3 68 205 4 76 117 1 09 912 2000-01 1 34 468 1 68 073 33 605 2001-02 4 03 667 4 83 846 80 179 2002-03 6 90 210 7 97 710 1 07 500 2003-04 8 19 955 9 11 032 91 077 2004-05 NIL NIL NIL 2005-06 10 05 214 10 10 348 5 134 3.1 IN HIS VALUATION REPORT DATED 10.04.2005 SHRI S.L. SHARMA THE REGISTERED VALUER HAS ESTIMATED THE COST OF CONSTRU CTION AT RS.33 62 800/- FROM THE PERIOD BETWEEN MAY 1997 AND 03/2005 WHERE AS THE DVO HAS ESTIMATED THE COST OF CONSTRUCTION BETWEEN THE PERI ODS 1997-98 AND SEPTEMBER 2006. IT IS ALSO NOTICED FROM THE VALUAT ION REPORT THAT THE REGISTERED VALUER HAS TAKEN THE PLINTH AREA RATE FI XED BY THE CHIEF ENGINEER C.P.W.D. W.E.F. 01.10.1976. THE ASSESSING OFFICER H AD MADE REFERENCE TO THE :-5-: DVO ON DISCREPANCIES NOTICED FROM THE DETAILS FILED BY THE APPELLANT HIMSELF E.G. THE APPELLANT HAD DISCLOSED THE INVESTMENT OF RS.33 95 519/- UP TO 31.03.2004 IN THE SHOPPING COMPLEX WHEREAS AS PER VALUATION REPORT OF REGISTERED VALUER THE COST OF CONSTRUCTION UP TO M ARCH 2005 WAS OF RS.33 62 800/-. 3.2 IT IS FACT THAT THE BEFORE ISSUANCE OF NOTICE U NDER SECTION 148 OF THE ACT ON 19.02.2007 NO REGULAR/ SCRUTINY ASSESSMENT WAS MADE FOR ASSESSMENT YEAR 2000-01. THE RETURN OF INCOME OF THE CAPTIONED ASSESSMENT YEAR WAS ACCEPTED UNDER SECTION 143(1) OF THE ACT. THE APPEL LANT HAS ALSO NOT MADE ANY CONTENTION THAT THE REGULAR/ SCRUTINY ASSESSMEN T WAS MADE OF THE A.Y. 2000-01 BEFORE REOPENING THE CASE AS ESCAPED ASSESS MENT. THE PRESENT PROVISIONS OF SECTION 147 WERE SUBSTITUTED W.E.F. 0 1.04.1989. THE PROVISIONS OF EXPLANATION 2 (B) OF SECTION 147 ENUMERATES AS U NDER:- 'EXPLANATION 2- FOR THE PURPOSES OF THIS SECTION T HE FOLLOWING SHALL ALSO BE DEEMED TO BE CASES WHERE INCOME CHARG EABLE TO TAX HAS ESCAPED ASSESSMENT NAMELY: (A) (B) WHERE A RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE BUT NO ASSESSMENT HAS BEEN MADE AND IT IS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS UNDERSTATED THE INCOME OR HAS CLAIMED EXCESSIVE LOSS DEDUCTIONS ALLOWANCE OR RELIEF IN THE RETURN... ' THUS THE APPELLANT'S CASE IS NOT A CASE OF REASSES SMENT OF REGULAR ASSESSMENT. FURTHER THE WORK 'NOTICED BY THE ASSE SSING OFFICER' IS USED FOR ESCAPED ASSESSMENT. THESE ARE DEEMING PROVISION S. THE CONTENTIONS OF THE APPELLANT ARE MOSTLY RELATED TO RE-ASSESSMENT P ROCEEDINGS I.E. AFTER COMPLETION OF ASSESSMENT PROCEEDINGS U/S 143(3) OF THE I.T. ACT 1961. FURTHER THE FACTS OF CITED JUDICIAL DECISIONS BY T HE APPELLANT ARE :-6-: DISTINGUISHABLE AS THE FACTS ARE NOT SIMILAR TO EAC H OTHER. THE ASSESSING OFFICER WAS HAVING REASON TO BELIEVE THAT THE INCOM E CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. THE WORD 'INFORMATION' WAS MENT IONED IN THE PROVISIONS OF SECTION 147 APPLICABLE UP TO 31.03.19 89. 3.3 FURTHER IN THE CASE OF DCIT VS. SHUBHAM INDUST RIES REPORTED IN 104 ITD 126 THE HON'BLE ITAT LUCKNOW - TM HAS HELD TH AT 'REFERENCE TO VALUATION OFFIICER UNDER SECTION 131 IS VALID IN VI EW OF SECTION 142A OF THE I.T ACT 1961. FURTHER IN THE CASE OF CIT VS. BHAWANI SHANKAR VYAS REPORTED IN 311 ITR 8 (UTTARAKHAND) THE HON'BLE COURT HAS HELD THAT THE ASSESSING OFFICER NEED NOT REJECT ACCOUNTS BEFORE MAKING REFE RENCE UNDER SECTION 131 (1)(D) OR CALLING FOR VALUATION REPORT UNDER SECTIO N 142A OF THE I.T. ACT 1961.' THE HON'BLE ITAT AHMEDABAD BENCH IN THE CA SE OF AMIT ESTATE OIRGANIZER VS. INCOME TAX OFFICER WARD-3 ANAND R EPORTED IN (2008) 113 ITD 255 (AHD )(TM) HAS HELD THAT 'SINCE A COMPAR ISON BETWEEN DVO'S REPORT AND REGISTERED VALUER'S REPORT SHOWED THAT S EVERAL ITEMS WERE NOT PROVIDED FOR IN VALUER'S REPORT FURNISHED BY THE AS SESSEE THIS MATERIAL INFORMATION WAS SUFFICIENT TO FORM A BELIEF THAT TH ERE WAS ESCAPEMENT OF INCOME IN THOSE YEARS.' THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF SMT . SHASHI JAIN VS. INCOME TAX OFFICER AND ANOTHER REPORTED IN 228 ITR 682 HAS HELD 'THAT NOTICE HAD BEEN ISSUED ON THE BASIS OF THE DEPARTME NTAL VALUER'S REPORT WITH RESPECT TO INVESTMENT IN A HOUSE CONSTRUCTED B Y THE PETITIONER. HENCE THERE WAS REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. THE PETITIONER WOULD HAVE AN OPPORTUNIT Y TO CONTEST THE CORRECTNESS OF THE VALUER'S REPORT DURING THE COURS E OF ASSESSMENT PROCEEDINGS IN PURSUANCE OF THE NOTICES UNDER SECTI ON 148. THE ASSESSMENT PROCEEDINGS WERE VALID.' THE HON'BLE DELHI HIGH COURT IN THE CASE OF BAWA AB HAI SINGH VS. DEPUTY COMMISSIONER OF INCOME TAX REPORTED IN 253 ITR 83 HAS HELD THAT 'POWER TO REOPEN AN ASSESSMENT IS MUCH WIDER UNDER THE PROVISIONS OF SECTION 147 :-7-: OF THE INCOME TAX ACT 1961 AS AMENDED WITH EFFECT FROM APRIL 1 1989 AND CAN BE EXERCISED EVEN WHEN THE ASSESSEE HAD DIS CLOSED FULLY AND TRULY ALL THE MATERIAL FACTS.' IT IS FURTHER OPINED BY TH E HON'BLE COURT IN THE CASE (SUPRA) THAT .IT COULD NOT BE SAID THAT THE REPO RT OF THE VALUATION OFFICER CONTAINING HIS CONCLUSIONS ABOUT THE VALUAT ION COULD NOT CONSTITUTE INFORMATION OR HAD TO BE TOTALLY EXCLUDED FROM CONS IDERATION EVEN IF IT WAS HELD THAT THE REPORT WAS OF NO CONSEQUENCE AFTER TH E ASSESSMENT HAD BEEN COMPLETED ..... ' 3.4 UNDER THESE FACTS AND CIRCUMSTANCES THE PROCEE DINGS U/S. 147 HAVE BEEN INITIATED BY RECORDING OF REASONS ON ACCOUNT O F UNEXPLAINED INVESTMENTS MADE IN THE CONSTRUCTION OF SHOPPING CO MPLEX AFTER CONSIDERING THE VALUATION REPORT OF THE DVO. THUS THERE WAS REASONABLE BELIEF BEFORE INITIATION OF PROCEEDINGS AND THE PR OCEEDINGS INITIATED U/S. 147 BY ISSUANCE OF NOTICE U/S. 148 ARE VALID. THE GROUNDS OF APPEAL FAIL AND THE ACTION OF THE ASSESSING OFFICER IS HEREBY S USTAINED. 6. AT THE VERY OUTSET SHRI. K. R. RASTOGI LD. COUNSE L FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSE SSEE AND AGAINST THE REVENUE BY THE ORDER OF THE DIVISION BENCH OF THE ITAT LUCKNOW B BENCH IN THE CASE OF INCOME TAX OFFICER-III FAIZABAD V. SHREE RAM VERMA BURHNAPUR MOTIGARHPUR BASKHARI AKBARPUR AMBEDKARNAGAR IN ITA NOS.259 & 260/LUC/10 FOR ASSES SMENT YEARS 2002-03 AND 2003-04. THE TRIBUNAL VIDE ITS ORDER DATED 26.5.2010 CONFIRM ED THE ORDER OF THE LD. CIT(A) IN CANCELLING THE ASSESSMENT ORDER PASSED BY THE ASSES SING OFFICER BY REOPENING THE ASSESSMENT U/S. 147 OF THE ACT SOLELY ON THE BASIS OF THE DVOS REPORT. THE FACTS OF THE CASE OF SHREE RAM VERMA (SUPRA) WAS THAT THE ASSESS EE FILED RETURN OF INCOME FOR ASSESSMENT YEAR 2002-03 ON 21.10.2002 SHOWING INCOM E AT RS.91 122/- AND FOR ASSESSMENT YEAR 2003-2004 RETURN WAS FILED ON 19.11 .2003 DECLARING INCOME AT RS.1 37 216/-. THE CASE FOR ASSESSMENT YEAR 2002-0 3 WAS PROCESSED U/S. 143(1) OF THE ACT AT AN INCOME OF RS. 54 936 ON 28.12.2003. SIMILARLY RETURN FILED FOR ASSESSMENT YEAR 2003-04 WAS PROCESSED U/S. 143(1) OF THE ACT AT AN INCOME OF RS.1 37 260 ON 14.1.2004. ASSESSING OFFICER INITIATED PROCEEDINGS U/S 147/148 OF THE ACT ON THE BASIS OF D.V.O.S :-8-: REPORT WHO HAD WORKED OUT INVESTMENT MORE THAN THE AMOUNT SHOWN BY THE ASSESSEE IN THE BOOKS OF ACCOUNTS. IN THE ASSESSMENT YEAR 2002 -2003 THE ASSESSING OFFICER MENTIONED THAT UNEXPLAINED INVESTMENT WAS OF RS.40 000/- I.E. THE DIFFERENCE BETWEEN VALUATION MADE BY THE D.V.O. AT RS.2 40 000/- AS AG AINST THE INVESTMENT SHOWN BY THE ASSESSEE AT RS.2 00 000/-. FOR THE ASSESSMENT YEAR 2003-2004 THE REASON FOR ISSUE OF NOTICE U/S 148 WAS ALSO STATED BY THE ASSESSING OFF ICER THAT THE INVESTMENT MADE IN CONSTRUCTION OF HOUSE WAS LESS THAN THE VALUATION M ADE BY THE D.V.O. THE ASSESSING OFFICER MADE THE ADDITIONS FOR BOTH THE YEARS. THE ASSESSEE CHALLENGED THE ORDERS OF THE ASSESSING OFFICER BEFORE THE LD. CIT(A) AND THE LD. CIT(A) ALLOWED THE APPEALS OF THE ASSESSEE FOLLOWING THE RATIO LAID DOWN BY THE JURIS DICTIONAL HIGH COURT IN THE CASE OF M/S FUSION ELECTRONICS PVT. LTD. VS. INCOME TAX OFFICER RENDERED IN WRIT PETITION NO. 11055 (MB) OF 2009 ORDER DATED 01.12.2009. 7. THE REVENUE CHALLENGED THE ORDERS OF THE LD. CIT(A) BEFORE THE TRIBUNAL AND THE MAIN CONTENTION OF THE REVENUE BEFORE THE TRIBUNAL WAS THAT THE ASSESSMENT IN THIS CASE WAS NOT FRAMED U/S 143(3) OF THE ACT RATHER THE RE TURNS OF INCOME FILED BY THE ASSESSEE WERE PROCESSED U/S 143(1) OF THE ACT. THEREFORE T HE CASES WERE RIGHTLY REOPENED U/S 148 OF THE ACT SINCE THE INVESTMENT IN HOUSE PROPERTY D ECLARED BY THE ASSESSEE WAS LESS THAN THE VALUATION MADE BY THE D.V.O. RELIANCE WAS PLAC ED ON THE JUDGMENT OF HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF SMT. SHASHI JAI N VS. INCOME TAX OFFICER [1997] 228 ITR 682 (ALL.). 8. HOWEVER ON BEHALF OF THE ASSESSEE IT WAS SUBMITTE D BEFORE THE TRIBUNAL THAT THE ASSESSING OFFICER REOPENED THE ASSESSMENT U/S 148 O F THE ACT SOLELY ON THE BASIS OF D.V.O.S REPORT AND DID NOT APPLY HIS OWN MIND THE REFORE THE REOPENING U/S 147 BY ISSUING THE NOTICE U/S 148 OF THE ACT WAS NOT JUSTIFIED. R ELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS:- (I) CIT VS. V. K. RAJAPANDIAN [2009] 311 ITR 477 ( MAD.) (II) CIT VS. SURESH KUMAR [2005] 275 ITR 253 (P&H) (III) ACIT VS. DHARIYA CONSTRUCTION COMPANY CIVIL APPEAL NO. 9468 OF 2003 ORDER OF HON'BLE SUPREME COURT DATED 16/02/2010 (IV) CIT VS. V. T. R AJENDRAN [2007] 288 ITR 312 (MAD.) :-9-: (V) ORDER OF ALLAHABAD HIGH COURT LUCKNOW BENCH IN THE CASE OF FUSION ELECTRONICS VS. INCOME TAX OFFICER. ORDER DATED 07 /12/2009. (VI) ORDER DATED 24/10/2008 OF ITAT LUCKNOW BENCH A LUCKNOW IN I.T.A. NO. 433/LUC/08 IN THE CASE OF INCOME TAX OFFICER VS. SH RI MAHARANI DEEN PANDEY. 9. THE DIVISION BENCH OF THIS TRIBUNAL HAS CONFIRMED T HE ORDER OF THE LD. CIT(A) IN CANCELING THE ASSESSMENT ORDERS PASSE D BY THE ASSESSING OFFICER BY REOPENING ASSESSMENT U/S. 147 SOLELY ON THE BASIS OF THE DVOS REPORT. THE RELEVANT FINDINGS OF THE TRIBUNAL ARE AS UNDER:- 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CA REFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN THE INSTANT C ASE IT IS NOT IN DISPUTE THAT THE ASSESSING OFFICER ISSUED NOTICE U/S 148 OF THE ACT SOLELY ON THE BASIS OF D.V.O.S REPORT NO OTHER REASON WAS GIVEN. ON A S IMILAR ISSUE THIS BENCH OF THE TRIBUNAL IN THE CASE OF INCOME TAX OFFICER VS. SHRI MAHARANI DEEN PANDEY IN I.T.A. NO.433/LUC/08 FOR THE ASSESSMENT Y EAR 2000-2001 VIDE ORDER DATED 24/10/2008 OBSERVED AS UNDER: 7. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIALS AVAILABLE ON R ECORD. IN THE INSTANT CASE IT IS NOT IN DISPUTE THAT THE BASIS FO R REOPENING OF THE ASSESSMENT WAS THE D.V.O.S REPORT. NOW QUESTION A RISES WHETHER THE REOPENING CAN BE MADE ONLY ON THE BASIS OF D.V. O.S REPORT. IN THIS REGARD THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF KAJARIA INVESTMENT AND PROPERTIES (P) LTD. VS. ITO & OTHERS 250 ITR 619 (CAL) HAS HELD AS UNDER: VALUATION IS ALWAYS A QUESTION OF OPINION AND UNLE SS THERE IS A CLEAR FINDING ON THE BASIS OF THE MATERI AL THAT THE ASSESSEE HAS INVESTED IN THE CONSTRUCTION MORE THAN WHAT HAS BEEN SHOWN BY IT IN THE COURSE OF ASSESSME NT PROCEEDINGS THE INCOME TAX OFFICER CANNOT PROCEED MERELY :-10-: ON THE BASIS OF THE VALUATION REPORT OF THE DEPARTM ENTAL VALUE. 8. IN THE INSTANT CASE AS THERE WAS NO INVESTMENT I N THE ASSETS BY THE ASSESSEE IN THE YEAR FOR WHICH NOTICE U/S 14 8 WAS ISSUED SO THE REOPENING ONLY ON THE BASIS OF REPORT OF THE D .V.O. WAS NOT VALID. 8.1 SIMILARLY THE HON'BLE PUNJAB & HARYANA HIGH COU RT IN THE CASE OF CIT VS. SURESH KUMAR 275 ITR 253 (P&H) HAS HELD AS UNDER: THAT A READING OF THE REASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER SHOWED THAT HE HAD ISSUED SH OW- CAUSE NOTICE TO THE ASSESSEE UNDER SECTION 147 OF T HE ACT SOLELY ON THE BASIS OF THE DEPARTMENTAL VALUERS RE PORT. THE PROCEEDINGS WERE INITIATED BECAUSE THE ASSESSING OF FICER CHANGED HIS OPINION ON THE ISSUE OF VALUATION OF TH E CONSTRUCTION. THE REASSESSMENT PROCEEDINGS WERE NO T VALID. 9. IN THE PRESENT CASE ALSO AS WE HAVE ALREADY NOT ED THAT THE NOTICE U/S 148 HAS BEEN ISSUED BY THE ASSESSING OFF ICER SOLELY ON THE BASIS OF D.V.O.S REPORT THEREFORE THE REASSE SSMENT PROCEEDINGS WERE NOT VALID. 10. SIMILAR VIEW HAS BEEN TAKEN BY HON'BLE MADRAS H IGH COURT IN THE CASE OF CIT VS. V. T. RAJENDRAN 288 ITR 312 WHE REIN IT HAS BEEN HELD THAT :-11-: THE REPORT OF THE DEPARTMENTAL VALUATION OFFICER COULD NOT BE THE BASIS FOR REASSESSMENT BECAUSE THE VALUATION CANNOT BE AN ARITHMETICAL APPRECIATION OF THE MATERIALS US ED FOR THE CONSTRUCTION OR THE EXPENSES INCURRED BY THE ASSESS EE IN THAT REGARD. THE TRIBUNAL WAS RIGHT AND THE REASSE SSMENT WAS NOT VALID. 11. IN THE PRESENT CASE ALSO THE REPORT OF THE D.V. O. WAS ONLY THE BASIS FOR ISSUING THE NOTICE U/S 148 OF THE ACT THEREFORE THE REASSESSMENT WAS NOT VALID. 12. WE THEREFORE CONSIDERING THE TOTALITY OF THE FACT OF THE PRESENT CASE AS DISCUSSED HEREIN ABOVE DO NOT SEE ANY INFIRMITY IN THE ORDER OF LEARNED CIT(A). 6.1 ON A SIMILAR ISSUE THE HON'BLE JURISDICTIONAL H IGH COURT IN THE CASE OF FUSION ELECTRONICS PVT. LTD. VS. INCOME TAX DEPARTM ENT THROUGH CCIT (SUPRA) OBSERVED AS UNDER: FROM THE RECORD IT APPEARS THAT THE ASSESSEE HAS CONSTRUCTED A FACTORY WHICH WAS COMPLETED WITHIN TH REE YEARS. ON THE BASIS OF THE D.V.O.S REPORT WHICH WAS SOUGHT DURING THE PREVIOUS ASSESSMENT YEAR THE ASSESSING OFFICER HAS MADE THE ADDITION IN THE EARLIER ASSESSMENT YEAR BUT THE SAM E WERE DELETED BY THE CIT(A). HOWEVER DURING THE ASSESSMENT YEAR UNDER CONSIDERATION IMPUGNED NOTICE FOR REOPENING THE AS SESSMENT WAS ISSUED ALONG WITH THE REASONS WHICH WERE SOLELY BAS ED ON THE D.V.O.S REPORT. :-12-: IT MAY BE MENTIONED THAT AS PER THE RATIO LAID DOW N IN THE CASE OF CIT VS. K. RAJAPANDIAN [2009] 311 ITR 477 ( MAD.) IT WAS OBSERVED THAT: IN CASE OF A CONSTRUCTION OF A BUILDING BY THE ASSESSEE FOR A REASSESSMENT TO BE MADE THE REPORT OF THE DEPARTMENTAL VALUATION OFFICER CANNOT BE A BASIS BE CAUSE THE VALUATION CANNOT BE AN ARITHMETICAL APPRECIATIO N OF THE MATERIALS USED FOR THE CONSTRUCTION NOR THE EXPENSE S INCURRED BY THE ASSESSEE IN THAT REGARD AS VARIATI ONS ARE BOUND TO BE THERE. FURTHER IN THE CASE OF CIT VS. V. T. RAJENDRAN [20 07] 288 ITR 312 (MAD.) IT WAS OBSERVED THAT: THE REPORT OF THE DEPARTMENTAL VALUATION OFFICER COULD NOT BE THE BASIS FOR REASSESSMENT BECAUSE THE VALUATION CANNOT BE AN ARITHMETICAL APPRECIATION OF THE MATERIALS USED FOR THE CONSTRUCTION OR THE EXPENSES INCURRED BY THE ASSESSEE IN THAT REGARD. THE TRIBUNAL WAS R IGHT AND THE REASSESSMENT WAS NOT VALID. IN THE LIGHT OF ABOVE SETTLED LEGAL POSITION WE SE T ASIDE THE IMPUGNED NOTICE ISSUED BY THE DEPARTMENT U/S 148 OF THE I.T. ACT AS THE SAME WAS ISSUED SOLELY BASED ON THE D.V.O.S REPORT. IN THE RESULT THE WRIT PETITION IS ALLOWED. NO OR DER TO COSTS. 6.2 RECENTLY THE HON'BLE APEX COURT IN THE CASE OF ACIT VS. DHARIA CONSTRUCTION CO. IN CIVIL APPEAL NO. 9468 OF 2003 V IDE ORDER DATED 16/12/2010 (COPY ON RECORD) HAS HELD AS UNDER: :-13-: HAVING EXAMINED THE RECORD WE FIND THAT IN THIS C ASE THE DEPARTMENT SOUGHT REOPENING OF THE ASSESSMENT BASED ON THE OPINION GIVEN BY THE DISTRICT VALUATION OFFICER (DV O). OPINION OF THE DVO PER SE IS NOT AN INFORMATION FOR THE PURPOS ES OF REOPENING ASSESSMENT UNDER SECTION 147 OF THE INCOME TAX ACT 1961. THE AO HAS TO APPLY HIS MIND TO THE INFORMATION IF ANY COLLECTED AND MUST FORM A BELIEF THEREON. IN THE CIRCUMSTANCES T HERE IS NO MERIT IN THE CIVIL APPEAL. THE DEPARTMENT WAS NOT ENTITLE D TO REOPEN THE ASSESSMENT. CIVIL APPEAL IS ACCORDINGLY DISMISSED . NO ORDER AS TO COSTS. 6.3 WE THEREFORE KEEPING IN VIEW THE RATIO LAID D OWN BY THE HON'BLE APEX COURT IN THE AFORESAID REFERRED TO CASE ARE O F THE CONFIRMED VIEW THAT THE LEARNED CIT(A) WAS FULLY JUSTIFIED IN CANCELLIN G THE ORDER PASSED BY THE ASSESSING OFFICER U/S 144 READ WITH SECTION 147 OF THE ACT. 6.4 AS REGARDS TO THE JUDGMENT OF HON'BLE JURISDICT IONAL HIGH COURT IN THE CASE OF SMT. SHASHI JAIN (SUPRA) HEAVILY RELIED BY THE LEARNED D. R. IT IS NOTICED THAT IN THE SAID CASE THE VALUER HAD NOT G IVEN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE BEFORE MAKING THE VALUATION. IT WAS OBSERVED THAT THE PETITIONER WILL HAVE OPPORTUNITY TO CONTEST THE CORRECTNESS OF THE VALUERS REPORT DURING HE COURSE OF ASSESSMENT PROCEEDINGS I N PURSUANCE OF NOTICE U/S 148 AND THAT NO NOTICE WAS REQUIRED TO BE GIVEN TO THE ASSESSEE BEFORE ISSUANCE OF NOTICE U/S 148. HOWEVER IN THE RECENT JUDGMENT THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF FUSION ELE CTRONICS (SUPRA) HAS SET ASIDE THE NOTICE ISSUED BY THE DEPARTMENT U/S 148 O F THE ACT AS THE SAME WAS ISSUED SOLELY ON THE BASIS OF D.V.O.S REPORT. IT IS WELL SETTLED THAT WHEN TWO DIFFERENT DECISIONS ARE AVAILABLE ON AN ISSUE THE ONE WHICH IS IN FAVOUR OF THE ASSESSEE IS TO BE FOLLOWED AS HAS BEEN HELD BY THE HON'BLE APEX COURT :-14-: IN THE CASE OF MYSORE MINERALS LTD. VS. CIT [1999] 239 ITR 775 WHEREIN IT HAS BEEN HELD THAT: THE PROVISIONS SHOULD BE SO INTERPRETED AND THE WO RDS USED THEREIN SHOULD BE ASSIGNED SUCH MEANING AS WOULD EN ABLE THE ASSESSEE TO SECURE THE BENEFIT INTENDED TO BE GIVEN BY THE LEGISLATURE TO THE ASSESSEE. IT IS ALSO WELL SETTL ED THAT WHERE THERE ARE TWO POSSIBLE INTERPRETATIONS OF A TAXING PROVIS ION THE ONE WHICH IS FAVOURABLE TO THE ASSESSEE SHOULD BE PREFERRED. THEREFORE THE CASE RELIED BY THE LEARNED D. R. IS O F NO HELP TO THE REVENUE DEPARTMENT. MOREOVER THE CONTROVERSY INVOLVED IN THE PRESENT CASE HAS NOW BEEN SETTLED BY THE HON'BLE APEX COURT IN THE A FORESAID REFERRED TO CASE OF ACIT VS. DHARIYA CONSTRUCTION COMPANY (SUPRA). WE THEREFORE CONSIDERING THE TOTALITY OF THE FACTS AND THE VARIO US JUDICIAL PRONOUNCEMENT DISCUSSED HEREIN ABOVE ARE OF THE CONFIRMED VIEW T HAT THE LEARNED CIT(A) WAS FULLY JUSTIFIED IN SETTING ASIDE THE ASSESSMENT ORDERS PASSED BY THE ASSESSING OFFICER BY REOPENING THE ASSESSMENT U/S 1 47 OF THE ACT SOLELY ON THE BASIS OF THE D.V.O.S REPORT. ACCORDINGLY WE DO NOT SEE ANY MERIT IN THESE APPEALS OF THE DEPARTMENT. 10. SHRI ANADI VERMA THE LD. D.R. MADE SIMILAR ARGUMEN TS AS THAT IN THE CASE OF SHREE RAM VERMA (SUPRA). HE HEAVILY RE LIED ON THE ORDERS OF THE LOWER AUTHORITIES. 11. IN THE INSTANT CASE IT IS AN ADMITTED FACT THAT TH E ASSESSING OFFICER ISSUED NOTICE U/S. 148 OF THE ACT SOLELY ON THE BAS IS OF DVOS REPORT NO OTHER REASON WAS GIVEN. THE FACTS OF THE PRESENT C ASE ARE SIMILAR TO THE FACTS OF THE CASE OF SHREE RAM VERMA (SUPRA) AND TH EREFORE RESPECTFULLY FOLLOWING THE ABOVE ORDER WHICH IS BASED ON THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF CIT V. DHARIYA CONSTRUCTION CO. REPO RTED IN 328 ITR 515 (SC) I :-15-: CANCEL THE ORDERS OF THE LOWER AUTHORITIES AND DIRE CT THE ASSESSING OFFICER TO ACCEPT THE RETURNED INCOME. ITA NOS.123 & 124/LKW/2011: 12. THE GROUNDS RAISED BY THE ASSESSEE IN THESE APPEALS ARE SIMILAR TO THAT IN ITA NO.122/LKW/2011. THE FACTS ARE ALSO SI MILAR EXCEPT THE AMOUNT OF ADDITION. IN THESE YEARS ALSO ASSESSMENTS WERE REOPENED U/S. 147 OF THE ACT SOLELY ON THE BASIS OF THE REPORT OF THE DV O. THEREFORE THE FINDINGS GIVEN IN ITA NO.122/LKW/2011 FOR ASSESSMEN T YEAR 2000-01 SHALL APPLY TO THESE APPEALS ALSO WITH EQUAL FORCE. CONS EQUENTLY I CANCEL THE ASSESSMENTS PASSED U/S. 147 OF THE ACT AND DIRECT T HE ASSESSING OFFICER TO ACCEPT THE RETURNED INCOME IN BOTH THE ASSESSMENT Y EARS UNDER CONSIDERATION. 13. SINCE I HAVE CANCELLED THE ORDERS OF THE LOWER AUTH ORITIES FOR ALL THE THREE ASSESSMENT YEARS UNDER CONSIDERATION ON LEGAL ISSUE AND THEREFORE I DO NOT THINK IT NECESSARY TO DECIDE THE GROUNDS RAI SED BY THE ASSESSEE ON MERITS IN THESE APPEALS. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 21.3.201 1. SD/- [H. L. KARWA] VICE PRESIDENT DATED:21.3.2011 JJ:21.03 COPY FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE DR ASSISTANT REGISTRAR