Shri Pradeep Soni & Others, v. The I T O 1 (2),

IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH INDORE BEFORE SHRI JOGINDER SINGH JUDICIAL MEMBER AND SHRI R.C. SHARMA ACCOUNTANT MEMBER ITA NOS.177 TO 179/IND/2009 A.YS. 2000-01 TO 2002-03 PRADEEP SONI & OTHERS L/H. LATE BABULAL SONI MILAN SWEETS & NAMKEEN 189 M.P. NAGAR BHOPAL PAN ATFTS 9970 H APPELLANT VS. ITO-1(2) BHOPAL RESPONDENT APPELLANT BY SHRI R.N. GUPTA CA RESPONDENT BY K.K. SINGH CIT DR ORDER PER SHRI R.C. SHARMA ACCOUNTANT MEMBER THESE APPEALS ARE FILED BY THE ASSESSEE AGAINST THE CONSOLIDATED ORDER OF LD. CIT(A)-I BHOPAL DATED 1 2.2.2009 FOR THE ASSESSMENT YEAR 2000-01 TO 2002-03. 2. FACTS IN BRIEF ARE THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF MAKING AND SELLING OF NAMKIN AND SWEETS UNDER THE NAME AND STYLE OF M/S. MILAN SWEET AND NAMKIN. ASSESSEE -: 2: - 2 FILED RETURN OF INCOME DECLARING INCOME OF RS. 1 40 000/- AND RS. 1 50 000/- FOR THE ASSESSMENT YEAR 2000-01 AND 2001-02 ON 30 TH MARCH 2002. RETURN FOR THE ASSESSMENT YEAR 2002-0 3 WAS FILED ON 09.08.2002 DECLARING INCOME OF RS. 1 6 0 000/-. INCOME WAS RETURNED ON THE BASIS OF RETAIL TRADER O FFERING INCOME @ 5% OF THE GROSS RECEIPT. GROSS RECEIPTS WE RE SHOWN AT RS. 24.80 26.80 AND 32.00 LACS IN THE ASSESSMEN T YEAR 2000-01 2001-02 AND 2002-03 RESPECTIVELY. NO BOOKS OF ACCOUNT WERE MAINTAINED ON THE PLEA OF SECTION 44AF OF THE INCOME-TAX ACT 1961. ALL THE RETURNS AS PER DEPART MENT WERE PROCESSED U/S 143(1). ON 2.1.2006 THE AO MADE A REF ERENCE TO THE DVO U/S 142A IN RESPECT OF ALL THE ASSESSMENT Y EARS UNDER CONSIDERATION. THE DVOS REPORT WAS OBTAINED BY THE ASSESSING OFFICER ON 9.3.2006. THEREAFTER THE AO I SSUED NOTICES U/S 148 ON 28.3.2006 FOR ALL THE YEARS UNDE R CONSIDERATION. IN THE REASONS SO RECORDED THE AO HA S MENTIONED THAT THE ASSESSEE HAS CONCEALED PARTICULA RS OF INVESTMENT MADE IN CONSTRUCTION OF BUILDING. THE AM OUNT ARRIVED AT BY THE DVO AS PER HIS REPORT DATED 9.3.2 006 WAS BIFURCATED IN THREE YEARS AND EXACTLY THE SAME AMOU NT WAS -: 3: - 3 MENTIONED IN THE REASONS SO RECORDED FOR REOPENING THE ASSESSMENT. WHILE FRAMING THE ASSESSMENT U/S 143(3) READ WITH SECTION 147 THE AO REFERRED THE SURVEY CARRIE D OUT U/S 133A ON 18.12.2002 RELEVANT TO THE ASSESSMENT YEAR 2003-04 AT THE BUSINESS PREMISES OF THE ASSESSEE. AS PER AO NO BOOKS OF ACCOUNT OR ROUGH REGISTERS OR SALES VOUCHERS WER E FOUND DURING SURVEY. CASH OF RS. 37 970/- WAS FOUND. IN T HE STATEMENT RECORDED DURING SURVEY ASSESSEE SHRI BA BULAL SONI ADMITTED THE NON-MAINTENANCE OF THE BOOKS OF ACCOUN T. SHRI BABULAL SONI ALSO STATED THAT WHATEVER ITEMS OF RAW MATERIALS LIKE MILK VEGETABLE MAWA ARE BROUGHT TO THE SHOP THE PAYMENT FOR THE SAME AND PAYMENT TO THE WORKERS WER E MADE IN CASH ONLY. DURING SURVEY IT WAS ALSO FOUND OUT THAT BUILDING PREMISES SITUATED AT 189 ZONE I M.P. NAG AR WAS OWNED BY SMT. BHAGWATI SONI W/O SHRI BABULAL SONI. THE BUSINESS ACTIVITY WAS DONE FROM THIS PLACE UNDER TH E NAME AND STYLE OF M/S. MILAN SWEETS AND NAMKEEN AND MILA N FAST FOOD. 3. THE AO DID NOT ACCEPT THE ASSESSEES VERSION REGAR DING ANNUAL SALES AND PROFIT THEREON IN THE RESPECTIVE Y EARS HE -: 4: - 4 ESTIMATED THE SALES AT RS. 1.10 CRORES IN THE ASSES SMENT YEAR 2000-01 RS. 1.15 CRORES IN ASSESSMENT YEAR 2001-02 AND RS. 1.20 CRORES IN ASSESSMENT YEAR 2002-03 AS AGAINST T HE SALES OF RS. 24.80 LAKHS RS. 26.80 LAKHS AND RS. 32.00 LAKH S FOR THE ASSESSMENT YEARS 2000-01 2001-02 AND 2002-03 RESPE CTIVELY. AS AGAINST THE PROFIT RATE OF 5 % APPLIED BY THE AS SESSEE U/S 44AF THE AO HAS COMPUTED PROFIT BY APPLYING PROFIT RATE OF 15 % ON THE SALES ESTIMATED BY HIM. 4. AS REGARDS THE BUILDING SITUATED AT 189 M.P. NAGA R IT WAS SUBMITTED BEFORE THE AO THAT THE SAID BUILDING HAS BEEN CONSTRUCTED ON A PLOT PURCHASED FROM BHOPAL DEVELOP MENT AUTHORITY BY THE ASSESSEES MOTHER SMT. BHAGWATI SO NI IN THE YEAR 1977. THIS PLOT WAS ALLOTTED UNDER THE FREEDOM -FIGHTERS QUOTA BECAUSE APPELLANTS FATHER WAS A FREEDOM FIG HTER. MOTHER OF THE APPELLANT SMT. BHAGWATI SONI DIED ON 7/8/2001 AND AFTER HER DEATH THE PLOT ALONGWITH TH E BUILDING CONSTRUCTED THEREON WAS MUTATED IN THE NAME OF HIS FATHER SHRI BABULAL SONI. SHRI BABULALJI SONI ALSO DIED O N 27.6.2005. IT WAS STATED BEFORE THE AO THAT FOR THE CONSTRUCTI ON OF THE BUILDING THE MOTHER OF THE ASSESSEE OBTAINED THE P ERMISSION -: 5: - 5 ON 2.2.1977 FROM THE MUNICIPAL CORPORATION BHOPAL ( COPY ATTACHED ) AND IMMEDIATELY AFTER HAVING OBTAINED S UCH PERMISSION SHE STARTED CONSTRUCTING THE BUILDING. IT IS SUBMITTED THAT THE BASEMENT AND THE GROUND FLOOR WA S COMPLETED FIRST I.E. BEFORE 30.01.1987 AS IS EVIDE NT FROM THE MUNICIPAL AUTHORITIES NOTICE DATED 30.01.87 AND 2 3.02.87. THE FURTHER CONSTRUCTION UP TO THE MEZZANINE FLOOR ( THIRD FLOOR) WAS COMPLETED BEFORE 31.3.99 AND THEREAFTER FOR MAKING CONSTRUCTION OF FURTHER TWO FLOORS ABOVE THE AFORES AID THIRD FLOOR PERMISSION WAS OBTAINED FROM MUNICIPAL AUTHO RITIES ON 21.04.99 ( COPY OF APPROVED MAP WAS FILED ). ON THE STRENGTH OF MUNICIPAL PERMISSION DATED 21.4.99 FURTHER FLOO RS I.E. FOURTH AND FIFTH FLOOR WERE CONSTRUCTED IN FINANCIA L YEAR 1999- 2000 AND 2000-01 . THE CONSTRUCTION WAS HOWEVER F INALLY COMPLETED BEFORE 17.1.2001. THIS FACT IS ALSO EVIDE NT FROM THE FOLLOWING DOCUMENTS :- (I) SANCTION OF UNAUTHORIZED CONSTRUCTION BY APPROVAL DATED 17.01.2001 ( COPY FILED ). (II) MUNICIPAL CORPORATION COMPOUNDING FEE RECEIPT NO.2202/57 DATED 17.01.2001 ( COPY FILED). -: 6: - 6 (III) MUNICIPAL CORPORATION COMPOUND FEE DEMAND NOTICE DATED 16.1.2001. ( COPY FILED ) 5. IT WAS ALSO SUBMITTED THAT THE ABOVE DOCUMENTS CONCLUSIVELY PROVE THE FACT THAT THE FIRST THREE FL OORS OF THE HOUSE (BASEMENT GROUND AND MEZZANINE ) WERE COMPLE TED BEFORE 31.3.99. THE SUBSEQUENT TWO FLOORS WERE COMP LETED IN FINANCIAL YEAR 1999-2000 AND 2000-01. ( RELEVANT AS SESSMENT YEARS 2000-01 AND 2001-02). THUS THE ABOVE DOCUMENT S ESTABLISH THE FACT THAT THE FIRST THREE FLOORS WERE COMPLETED BEFORE 31.3.99 I.E. UP TO ASSESSMENT YEAR 1999-2000 . THE OTHER TWO FLOORS I.E. FOURTH AND FIFTH FLOORS WERE CONSTRUCTED AND COMPLETED IN ASSESSMENT YEAR 2000-01 AND 2001-0 2. 6. BY REFERRING TO THE REFERENCE TO THE DVO U/S 142A O N 2 ND JANUARY 2006 AND ON THE BASIS OF DVOS REPORT DA TED 9.3.2006 AN ADDITION OF RS. 37 LAKHS RS. 50 LAKHS AND RS. 58.98 LAKHS WERE MADE U/S 69 ON ACCOUNT OF UNEXPLAI NED INVESTMENT IN BUILDING. AGGRIEVED BY THE ORDER OF A O THE ASSESSEE FILED THE APPEAL BEFORE THE LD. CIT(A). BE FORE THE LD. CIT(A) THE ASSESSEE CHALLENGED THE VALIDITY OF REO PENING OF -: 7: - 7 ASSESSMENT ON THE PLEA THAT MERELY ON THE BASIS OF DVOS REPORT THE ASSESSMENT CANNOT BE REOPENED. 7. IT WAS SUBMITTED THAT IN ALL THE ABOVE THREE ASSES SMENT YEARS THE ISSUE OF NOTICE U/S 148 AND THE RE-ASSES SMENT MADE ARE UNLAWFUL AND WITHOUT JURISDICTION AND THEREFOR E THE RE- ASSESSMENT ORDERS FOR ALL THE THREE ASSESSMENT YEAR S BE CANCELLED. IT IS ADDED THAT THE REGULAR RETURNS IN THE NORMAL COURSE OF THE SAID YEARS WERE FILED ON THE DATES AS UNDER :- 1. A.Y. 2000-01 30.03.2002 2. A.Y. 2001-02 30.03.2002 3. A.Y. 2002-03 09.08.2002 8. IT WAS ARGUED THAT AFTER SUBMITTING THE RETURNS AB OVE THE APPELLANT DID NOT RECEIVE ANY COMMUNICATION FRO M THE DEPARTMENT AS TO THE DISPOSAL OF THE SAID RETURNS. TIME PERIOD FOR ISSUE OF NOTICE U/S 143(2) ALSO EXPIRED. THE RE -ASSESSMENT ORDERS SHOW THAT THE AO HAD MADE REFERENCE U/S 142A OF THE INCOME-TAX ACT 1961 TO THE DVO FOR THE ASSESSMENT OF COST OF CONSTRUCTION OF THE BUILDING. THE PARTICULARS OF WH ICH HAVE BEEN GIVEN BY THE ASSESSING OFFICER IN PARA 2 OF HI S ORDER. THE DVO SUBMITTED THE REPORT TO THE AO VIDE LETTER DATE D 9.3.2006 -: 8: - 8 AS MENTIONED BY THE ASSESSING OFFICER IN HIS ASSES SMENT ORDER. THE A.O. FURTHER MENTIONS IN HIS ORDER THAT THE DVO VIDE LETTER DATED 27.3.2006 CLARIFIED THAT THE COST OF CONSTRUCTION HAS BEEN DISTRIBUTED AS UNDER :- 1. FINANCIAL YEAR 1999-2000 RS.37 00 000 ( 40000000-30000) (CREDIT OF SALVAGE) 2. FINANCIAL YEAR 2000-01 RS. 50 00 000/- 3. FINANCIAL YEAR 2001-02 RS. 58 98 334/- TOTAL RS. 1 45 98 334/- IT WAS FURTHER SUBMITTED THAT THE AO IN THE ASSESS MENT ORDER FURTHER SAYS THAT BASED ON THE FINDINGS OF DVO NOTI CES U/S 148 WERE ISSUED ON 28.3.2006 WHICH WERE SERVED ON A PPELLANT ON 5.4.2006 AND THUS HE ISSUED NOTICES U/S 148 FOR ALL THE SAID THREE YEARS AND IN THE SAID NOTICES HE SPECIFI CALLY MENTIONED THAT THE ABOVE REPORTED COST OF THE DVO I S PROPOSED TO BE ASSESSED. IT WAS ALSO CONTENDED THAT IN VIEW OF THIS POSITION THE RE-ASSESSMENT PROCEEDINGS AND THE ISS UE OF NOTICES U/S 148 ARE UNLAWFUL AND WITHOUT JURISDICTI ON BECAUSE - -: 9: - 9 (I) REFERENCE TO U/S 142A IS ALSO INVALID BECAUSE ON THE DATE WHEN SUCH REFERENCE WAS MADE NO PROCEEDINGS OF ASSESSMENT/RE-ASSESSMENT WERE PENDING. (II) THE ISSUE OF NOTICES U/S 148 SINCE ISSUED SOLELY ON THE BASIS OF DVOS REPORT ARE IMPERMISSIBLE IN LAW AND THEREFORE THE ISSUE OF SUCH NOTICES U/S 148 ARE WHOLLY UNLAWFUL AND WITHOUT JURISDICTION. 9. VALIDITY OF REFERENCE MADE TO THE DVO U/S 142A WAS ALSO CHALLENGED ON THE PLEA THAT NO ASSESSMENT PROC EEDINGS WERE PENDING AS ON 2 ND JANUARY 2006 WHEN REFERENCE WAS MADE TO THE DVO. RELIANCE WAS PLACED ON THE DECISIO N OF THE JURISDICTIONAL HIGH COURT IN SUPPORT OF THE PROPOSI TION THAT WHERE NO ASSESSMENT PROCEEDINGS WERE PENDING ON THE DATE OF ISSUE OF COMMISSION THE COMMISSION ISSUED TO THE D VO U/S 131(1)(D) TO ASCERTAIN THE COST OF CONSTRUCTION WAS INVALID. FOR THIS PURPOSE RELIANCE WAS ALSO PLACED ON THE DECIS ION OF M.P. HIGH COURT IN THE CASE OF CHOWDHARY BUILDERS PRIVAT E LIMITED 209 CTR 133. RELIANCE WAS ALSO PLACED ON THE DECISI ON OF -: 10: - 10 HON'BLE M.P. HIGH COURT IN THE CASE OF NAVENDRAM A HUJA 290 ITR 453 ( M.P.) WHEREIN IT WAS HELD THAT COMMISSI ON U/S 131(1)(D) COULD BE ISSUED BY THE ASSESSING OFFICER ONLY DURING PENDENCY OF THE ASSESSMENT PROCEEDINGS AND THE REFE RENCE BY THE ASSESSING OFFICER TO THE DVO BEING PRIOR TO THE INITIATION OF ASSESSMENT PROCEEDING WAS NOT VALID AND CONSEQUENTL Y VALUATION REPORT OF THE DVO CANNOT BE MADE USE FOR MAKING ANY ADDITION U/S 69 IN RESPECT OF UNEXPLAINED INVES TMENT IN CONSTRUCTION OF BUILDING. 10. TRADING ADDITION MADE BY ESTIMATING SALES AT HIGHER FIGURE WAS ALSO CHALLENGED ON THE PLEA THAT THERE W AS NO MATERIAL OR ANY EVIDENCE BEFORE THE AO TO ASSUME SA LE AT RS. 1.10 CRORES IN THE ASSESSMENT YEAR 2000-01 RS. 1.1 5 CRORES IN ASSESSMENT YEAR 2001-02 AND RS. 1.20 CRORES IN ASSE SSMENT YEAR 2002-03 AS AGAINST THE SALES OF RS. 24.80 LAKH S RS. 26.90 LAKHS AND RS. 32.00 LAKHS FOR THE ASSESSMENT YEARS 2000-01 2001-02 AND 2002-03 RESPECTIVELY. IT WAS A LSO CONTENDED THAT THE ASSESSEE WAS CARRYING ON RETAIL TRADE OF SWEET AND NAMKEEN AND SINCE SALES WAS BELOW RS. 40 LAKHS NO BOOKS OF ACCOUNT WERE MAINTAINED AND IN THE RETU RN OF -: 11: - 11 INCOME PROFIT WAS SHOWN AT 5% OF THE SALES. HOWEVE R THE LD. CIT(A) DID NOT ACCEPT THE ASSESSEES CONTENTION WIT H REGARD TO VALIDITY OF REOPENING AND CONFIRMED THE REOPENING O F ASSESSMENT AFTER HAVING THE FOLLOWING OBSERVATIONS :- 4.1 I HAVE CONSIDERED THE ABOVE SUBMISSIONS. THE LD. AUTHORIZED REPRESENTATIVE SEEMS TO BE PRESUMING TOO MUCH AND SEEKS TO BUILD HIS CASE ON MERE HYPOTHETICAL ASSUMPTIONS. THE EASIEST OPTION THAT COULD HAVE BEEN EASILY AVAILABLE WAS TO SEEK INSPECTION OF THE OFFICE RECORDS AND BASE HIS ARGUMENTS ON THE FACTS GATHERED FORM THERE. IT HAS ALWAYS TO BE REMEMBERED THAT THERE IS NO PRESUMPTION AGAINST THE LAW OR ITS IMPLEMENTATION. NOR IS THE ISSUE OF NOTICES U/S 148 SOLELY ON THE B ASIS OF DVOS REPORT IMPERMISSIBLE IN LAW AS THE LD. AUTHORIZED REPRESENTATIVE SEEMS TO SUGGEST. AS HAS BEEN HELD IN THE DECISION IN THE CASE OF CWT VS. CHHATRSHAL SINHJI D. ZALA (1981) 25 CGR 260 91982) 8 TAXMAN 205: (1982) 135 ITR 826 ( GUJ) ORDINARILY A VALUATION REPORT CAN CONSTITUTE INFORMATION FOR T HE -: 12: - 12 PURPOSE OF SECTION 147(B). IT WAS ALSO HELD IN AMRU T TALKIES VS. ITO (1984) 150 ITR 386 (KARN) THAT ASSESSMENTS COMPLETED AFTER ACCEPTING THE COST OF CONSTRUCTION OF A REGISTERED VALUER AND LATER ON T HE BASIS OF THE REPORT OF THE OFFICIAL VALUER SHOWING A HIGHER COST OF CONSTRUCTION ACTION INITIATED U/S14 7(B) WAS HELD TO BE VALID. OBVIOUSLY THE NOTICES ISSUED U/S 148 WERE VALID. 4.2 TO MY MIND THERE IS NO MERIT IN THE LD. AUTHORIZED REPRESENTATIVES SUBMISSIONS THAT THE ISSUE OF NOTICES U/S 148 WAS INVALID AND WITHOUT JURISDICTION. THE FACTS ATTENDING THE PRESENT MATTE R SPEAK FOR THEMSELVES. THE EXPRESSION REASON TO BELIEVE INTRODUCED IN SECTION 147 BY THE AMENDING ACT 1989 IS WELL SETTLED THROUGH A PLETHORA OF RULINGS. IT IS NOT A CONDITION PRECEDENT THAT THE A O SHOULD CONVENE THE ASSESSEE OR TO INTIMATE TO HIM THE NATURE OF THE ALLEGED ESCAPEMENT OR TO GIVE HIM AN OPPORTUNITY OF BEING HEARD BEFORE HE DECIDES TO OPERATE THE POWERS CONFERRED BY THE SECTION. THE -: 13: - 13 EXPRESSION REASON TO BELIEVE POSTULATES BELIEF A ND THE EXISTENCE OF REASONS FOR THAT BELIEF. THE BELIE F MUST BE HELD IN GOOD FAITH IT CANNOT BE MERELY A PRETENSE. THERE SHOULD BE FACTS BEFORE THE AO THAT REASONABLY GIVE RISE TO SUCH BELIEF BUT THEY NEED N OT AT THAT STAGE BE IRREFUTABLY CONCLUSIVE TO SUPPORT HIS TENTATIVE CONCLUSION. SUCH BELIEF AT THAT STAGE OBVIOUSLY IS A TENTATIVE BELIEF TO BE EXAMINED AND SCRUTINIZED ON SUCH EVIDENCE AS MAY BE AVAILABLE IN THE PROCEEDINGS FOR ASSESSMENT OR REASSESSMENT. THE SATISFACTION OF THE AO FOR THE PURPOSE OF REOPENING AN ASSESSMENT IS SUBJECTIVE IN CHARACTER AND THE SCOPE OF APPELLATE REVIEW IS LIMITED. WHEN THE REASONS RECORDED SHOW A NEXUS BETWEEN FORMATION OF BELIEF AND THE ESCAPEMENT OF INCOME A FURTHER ENQUIRY ABOUT THE ADEQUACY OR SUFFICIENCY OF THE MATERIAL T O REACH SUCH BELIEF IS NOT OPEN TO SCRUTINY. THESE PROPOSITIONS ARE TRITE AND IT WOULD BE SUFFICIENT T O ADVERT TO THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN PRAFUL CHUNILAL PATEL : VASANT CHUNILAL PA TEL -: 14: - 14 VS. ACIT (1999) 236 ITR 832 839 ( GUJ ) WHERE IT WAS HELD THUS : AS NOTED ABOVE THE PROVISIONS OF SECTION 147 REQUIRE THAT THE AO SHOULD HAVE REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THE WORD REASON IN THE PHRASE REASON TO BELIEVE WOULD MEAN CAUSE OR JUSTIFICATION. IF THE AO HAS A CAUSE OR JUSTIFICATION TO THINK OR SUPPOSE THAT INCOME HAD ESCAPED ASSESSMENT HE CAN BE SAID BE HAVE A REASON TO BELIEVE THAT SUCH INCOME HAD ESCAPED ASSESSMENT. THE WORDS REASON TO BELIEVE CANNOT MEAN THAT THE AO SHOULD HAVE FINALLY ASCERTAINED THE FACTS BY LEGAL EVIDENCE. THEY ONLY MEAN THAT FORMS A BELIEF FROM THE EXAMINATION LIE MAKES AND IF HE LIKES FROM ANY INFORMATION THAT HE RECEIVES. IF HE DISCOVERS OR FINDS OR SATISFIES HIMSELF THAT THE TAXABLE INCOME HAS ESCAPED ASSESSMENT IT WOULD -: 15: - 15 AMOUNT TO SAYING THAT HE HAD REASON TO BELIEVE THAT SUCH INCOME HAD ESCAPED ASSESSMENT. THE JUSTIFICATION FOR HIS BELIEF IS NOT TO BE JUDGED FROM THE STANDARDS OF PROOF REQUIRED FOR COMING TO A DECISION. A BELIEF THOUGH JUSTIFIED FOR THE PURPOSE OF INITIATION OF THE PROCEEDINGS UNDER SECTION 147 MAY ULTIMATELY STAND ALTERED AFTER THE HEARING AND WHILE REACHING THE FINAL CONCLUSION ON THE BASIS OF THE INTERVENING ENQUIRY. AT THE STAGE WHERE HE FINDS A CAUSE OR CAUSE OR JUSTIFICATION TO BELIEVE THAT SUCH INCOME HAS ESCAPED ASSESSMENT THE AO IS NOT REQUIRED TO BASE HIS BELIEF ON ANY FINAL ADJUDICATION OF THE MATTER.. IN CASES WHERE THE AO HAD OVERLOOKED SOMETHING AT THE FIRST ASSESSMENT THERE CAN IN OPINION BE NO QUESTION OF ANY CHANGE OF OPINION WHEN THE INCOME WHICH WAS CHARGEABLE TOT AX IS TAXED AS IT OUGHT TO HAVE BEEN UNDER THE LAW BUT WAS NOT -: 16: - 16 DUE TO AN ERROR COMMITTED AT THE FIRST ASSESSMENT. 4.3 THE FUNCTION OF THE AO IS TO ADMINISTER THE ACT WITH SOLICITUDE FOR PUBLIC TREASURY AND WITH FAIRNE SS TO THE TAX PAYERS. HE IS NECESSARILY ARMED WITH GRE AT POWERS UP TO FOUR YEARS AN ASSESSMENT IS OPEN TO HIS UNRESERVED CONSIDERATION ON HIS FORMATION OF TH E REQUISITE BELIEF. IF HE HAS SUCH REASON HE HAS THE POWER AND WE MAY ADD THAT IT IS HIS DUTY TO REOPEN THE DOOR AND DEMAND THE AMOUNT LEGALLY OWING. HIS FORMATION OF BELIEF IS NOT A JUDICIAL DECISION BUT AN ADMINISTRATIVE DECISION. IT DOES NOT DETERMINE ANYTHING AT THIS INITIAL STAGE BUT THE AO HAS A DUT Y TO PROCEED SO AS TO OBTAIN WHAT THE TAXPAYER WAS ALWAYS BOUND TO PAY IF THE INCREASE IS JUSTIFIED AT ALL. THE DECISION TO INITIATE THE PROCEEDINGS IS NOT TO BE PRECEDED BY ANY JUDICIAL OR QUASI-JUDICIAL ENQUIRY. HIS REASONING MAY BE THE RESULT OF OFFICIAL INFORMA TION OR HIS OWN INVESTIGATION OR MAY COME FROM ANY SOURCE THAT HE CONSIDERS RELIABLE. HIS REASON IS NO T TO -: 17: - 17 BE JUDGED BY A COURT BY THE STANDARD OF WHAT THE IDEAL MAN WOULD THINK. HE IS THE ACTUAL MAN TRUSTED BY THE LEGISLATURE AND CHARGED WITH THE DUTY OF FORMING OF A BELIEF FOR THE MERE PURPOSES OF DETERMINING WHETHER HE SHOULD PROCEED TO COLLECT WHAT IS STRICTLY DUE BY LAW AND NO OTHER AUTHORITY CAN SUBSTITUTE ITS STANDARD OF SUFFICIENT REASON IN THE CIRCUMSTANCES OR HIS OPINION OR BELIEF FOR HIS. UN LESS THE GROUND OR MATERIAL ON WHICH HIS BELIEF IS BASED IS FOUND TO BE SO IRRATIONAL AS NOT TO BE WORTHY OF BEING CALLED A REASON BY ANY HONEST MAN HIS CONCLUSION THAT IT CONSTITUTES A SUFFICIENT REASON REALLY EXISTED AND IF IT DID WHETHER IT WAS SO IRRATIONAL AS TO OUTSIDE THE LIMITS OF HIS ADMINIST RATIVE DISCRETION WITH WHICH THE AO HONESTLY COMES TO A CONCLUSION THAT A MISTAKE HAS BEEN MADE IT MATTERS NOTHING SO AS HIS JURISDICTION TO INITIATE THE PROCEEDINGS U/S 147 IS CONCERNED THAT HE MAY HAVE COME TO AN ERRONEOUS CONCLUSION WHETHER ON LAW OR ON FACTS. HIS JURISDICTION TO INITIATE PROCEEDINGS U/S -: 18: - 18 147 FOR ASSESSMENT AND RE-ASSESSMENT IS EVEN IN SUCH CASE CORRECTLY AND RIGHTLY EXERCISED THOUGH HE MAY HAVE TAKEN AN ERRONEOUS VIEW OF THE LAW WITH REGARD TO THE MISTAKE COMMITTED AT THE FIRST ASSESSMENT PROCEEDINGS THAT HE HAS FOUND OUT. THEREFORE UNLESS IT IS SHOWN THAT THE AO ENQUIRED INTO THE MATTER AT ALL OR THAT HE NEVER HONESTLY BELIEVED THAT A MISTAKE HAS BEEN MADE THE RESULT OF HIS INVESTIGATION AND INITIATION OF THE PROCEEDINGS U/S 147 OF THE ACT CANNOT BE CHALLENGED ON THE GROUND O F WANT OF JURISDICTION. THE PLEADINGS URGED BY THE LD . AUTHORIZED REPRESENTATIVE ON THE POINT OF JURISDICT ION ARE THEREFORE REJECTED. 11. THE LD. CIT(A) ALSO CONFIRMED THE ACTION OF THE AO WITH REGARD TO THE ESTIMATION OF THE SALES AND THE TRADI NG ADDITION MADE BY APPLYING NET PROFIT RATE OF 15 %. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) THE ASSESSEE IS IN FURTHER APPEAL BEFORE US IN RESPECT OF ALL THE YEARS UNDER CONSIDERATION. FOLLOWING COMMON GROUNDS HAVE BEEN RAISED. I.T.A.NO. 177/IND/2009 ( A.Y. : 2000-01 ) : -: 19: - 19 12. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APP EAL: 1.THAT ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE THE DECISION IS CONTRARY TO LAW MATERIALLY INCORRECT AND UNSUSTAINABLE IN LAW AS WELL AS FACTS AND THAT ALL THE FINDINGS OF THE LEARNED LOWER AUTHORITIES THEREIN ARE ALSO CONTRARY TO THE EVIDEN CE AND INCORRECT. 2. THAT ON THE FACTS & IN CIRCUMSTANCES OF THE CASE AND IN LAW THE ISSUE OF NOTICE U/S L48 & THE RE- ASSESSMENT MADE ARE UNLAWFUL AND WITHOUT JURISDICTION AND THEREFORE THE SAME BE CANCELLED. 3. THAT ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED LOWER AUTHORITIES ERRE D AND NOT JUSTIFIED IN ESTIMATING THE ASSESSEE'S SALE S AT RS.1 10 00 000/- AND APPLYING NET PROFIT @ 15% THEREON AND THUS ESTIMATING THE INCOME OF THE ASSESSEE AT RS.16 50 000/-. SUCH ESTIMATES ARE PURELY WILD GUESSWORK WITHOUT REFERENCE TO ANY EVIDENCE OR MATERIAL THEREFORE BE QUASHED AND THE BUSINESS INCOME AS SHOWN IN THE RETURN BE ACCEPTED. -: 20: - 20 4. THAT ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE REFERENCE TO VALUATION CELL FO R THE ASSESSMENT OF THE COST OF CONSTRUCTION BY THE A.O. TO THE DVO IS WHOLLY UNLAWFUL AND UNJUSTIFIED AND THE DVO'S REPORT BASED ON WRONG ASSUMPTION OF FACTS IS AN INADMISSIBLE EVIDENCE IN LAW HENCE THE ADDITION MADE AT RS.37 00 000/- ON THE BASIS OF SUCH ERRONEOUS REPORT IS UNLAWFUL AND UNJUSTIFIED AND THEREFORE BE DELETED. 5. THAT ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE REPORT OF THE DVO IS NOT BASED ON PROPER APPRECIATION OF THE FACTS AND THAT HE HA S WRONGLY TAKEN THAT THE FLOORS BASEMENT TO FIFTH FLO OR WERE CONSTRUCTED DURING THE PERIOD 1.4.99 TO 31.3.2003 AND HENCE SUCH REPORT IS NOT A RELIABLE PIECE OF EVIDENCE AND THE ADDITION MADE AT RS.37 00 000/- ON THE BASIS OF SUCH ERRONEOUS REPOR T IS UNLAWFUL AND UNJUSTIFIED. 6. THAT ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE METHOD OF VALUATION AS ADOPTED -: 21: - 21 BY THE DVO IS WHOLLY ERRONEOUS AND INJUDICIOUS AS I T DID NOT TAKE INTO CONSIDERATION THE ACTUAL COST INCURRED BY THE ASSESSEE AND THE SAME IS ALSO NOT BASED ON THE STATE PWD CSR. THUS THE ESTIMATE OF THE COST OF CONSTRUCTION OF THE DVO IS NEITHER FAIR NOR JUDICIOUS NOR IT IS LAWFUL AND THEREFORE ADDITIO N MADE ON THE BASIS OF SUCH REPORT IS WHOLLY UNLAWFUL AND UNJUSTIFIED. 8. THAT ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE FINDINGS OF THE LEARNED CIT(A) THAT THE CONSTRUCTION WHICH WAS COMPLETED BEFORE 31.3.99 WERE DEMOLISHED ARE WHOLLY UNLAWFUL AND INCORRECT AND THE SAME THEREFORE BE QUASHED. 8. THAT ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE AND HAVING REGARD TO THE EVIDENCE PLACED BEFOR E THE LEARNED LOWER AUTHORITIES IT BE HELD THAT THE CONSTRUCTION BASEMENT AND THE GROUND FLOOR PORTION OF THE BUILDING WAS COMPLETED BEFORE 30.01.1987 AND THEREFORE THE INVESTMENT MADE IN THE SAID PORTION OF BUILDING IS NOT ASSESSABLE TO TAX IN THE IMPUGNED -: 22: - 22 ASSESSMENT YEAR. 9. THAT ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE AND HAVING REGARD TO THE EVIDENCES PLACED BEFORE THE LEARNED LOWER AUTHORITIES IT BE HELD TH AT THE CONSTRUCTION OF FIRST FLOOR (MEZZANINE FLOOR) P ORTION OF THE BUILDING WAS COMPLETED BEFORE 31.03.1999 AND THEREFORE THE INVESTMENT MADE IN THE SAID PORTION OF BUILDING IS NOT ASSESSABLE TO TAX IN THE IMPUGNED ASSESSMENT YEAR. 10. THAT ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE AND HAVING REGARD TO THE EVIDENCES PLACED BEFORE TH E LEARNED LOWER AUTHORITIES IT BE HELD THAT THE SECO ND FLOOR THIRD FLOOR AND THE SMALL PORTION ON FOURTH & FIFTH FLOOR (FOR LIFT & ITS CONTROL PANEL PURPOSE) OF THE BUILDING WERE CONSTRUCTED DURING THE PERIOD 21.04.1999 TO 17.01.2001 AND THEREFORE THE INVESTMENT MADE IN T HE SAID PORTION OF BUILDING IS ONLY REQUIRED TO BE CON SIDERED IN ASSESSMENT YEARS 2000-01 & 2001-02. 11. THAT ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE ASSESSEE IS NOT LIABLE FOR INTEREST U/S -: 23: - 23 234B & 234C. THE SAID LEVIES ARE UNLAWFUL AND THEREFORE BE CANCELLED. ITA NO.178/IND/2010 (AY: 2001-02): 13. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL: 1. THAT ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE THE DECISION IS CONTRARY TO LAW MATERIALLY INCORRECT AND UNSUSTAINABLE IN LAW AS WELL AS FACTS AND THAT ALL THE FINDINGS OF THE LEARNED LOWER AUTHORITIES THEREIN ARE ALSO CONTRARY TO THE EVIDEN CE AND INCORRECT. 2. THAT ON THE FACTS & IN CIRCUMSTANCES OF THE CASE AND IN LAW THE ISSUE OF NOTICE U/S L48 & THE RE- ASSESSMENT MADE ARE UNLAWFUL AND WITHOUT JURISDICTION AND THEREFORE THE SAME BE CANCELLED. 3. THAT ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED LOWER AUTHORITIES ERRE D AND NOT JUSTIFIED IN ESTIMATING THE ASSESSEE'S SALE S AT RS.1 15 00 000/- AND APPLYING NET PROFIT @ 15% -: 24: - 24 THEREON AND THUS ESTIMATING THE INCOME OF THE ASSESSEE AT RS.17 25 000/-. SUCH ESTIMATES ARE PURELY WILD GUESSWORK WITHOUT REFERENCE TO ANY EVIDENCE OR MATERIAL THEREFORE BE QUASHED AND THE BUSINESS INCOME AS SHOWN IN THE RETURN BE ACCEPTED. 4. THAT ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE REFERENCE TO VALUATION CELL FO R THE ASSESSMENT OF THE COST OF CONSTRUCTION BY THE A.O. TO THE DVO IS WHOLLY UNLAWFUL AND UNJUSTIFIED AND THE DVO'S REPORT BASED ON WRONG ASSUMPTION OF FACTS IS AN INADMISSIBLE EVIDENCE IN LAW HENCE THE ADDITION MADE AT RS.50 00 000/- ON THE BASIS OF SUCH ERRONEOUS REPORT IS UNLAWFUL AND UNJUSTIFIED AND THEREFORE BE DELETED. 5. THAT ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE REPORT OF THE DVO IS NOT BASED ON PROPER APPRECIATION OF THE FACTS AND THAT HE HA S WRONGLY TAKEN THAT THE FLOORS BASEMENT TO FIFTH FLO OR WERE CONSTRUCTED DURING THE PERIOD 1.4.99 TO 31.3.2003 AND HENCE SUCH REPORT IS NOT A RELIABLE -: 25: - 25 PIECE OF EVIDENCE AND THE ADDITION MADE AT RS.50 00 000/- ON THE BASIS OF SUCH ERRONEOUS REPOR T IS UNLAWFUL AND UNJUSTIFIED. 6. THAT ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE METHOD OF VALUATION AS ADOPTED BY THE DVO IS WHOLLY ERRONEOUS AND INJUDICIOUS AS I T DID NOT TAKE INTO CONSIDERATION THE ACTUAL COST INCURRED BY THE ASSESSEE AND THE SAME IS ALSO NOT BASED ON THE STATE PWD CSR. THUS THE ESTIMATE OF THE COST OF CONSTRUCTION OF THE DVO IS NEITHER FAIR NOR JUDICIOUS NOR IT IS LAWFUL AND THEREFORE ADDITIO N MADE ON THE BASIS OF SUCH REPORT IS WHOLLY UNLAWFUL AND UNJUSTIFIED. 7. THAT ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE FINDINGS OF THE LEARNED CIT(A) THAT THE CONSTRUCTION WHICH WAS COMPLETED BEFORE 31.3.99 WERE DEMOLISHED ARE WHOLLY UNLAWFUL AND INCORRECT AND THE SAME THEREFORE BE QUASHED. 8. THAT ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE AND HAVING REGARD TO THE EVIDENCE PLACED BEFOR E -: 26: - 26 THE LEARNED LOWER AUTHORITIES IT BE HELD THAT THE CONSTRUCTION BASEMENT AND THE GROUND FLOOR PORTION OF THE BUILDING WAS COMPLETED BEFORE 30.01.1987 AND THEREFORE THE INVESTMENT MADE IN THE SAID PORTION O F BUILDING IS NOT ASSESSABLE TO TAX IN THE IMPUGNED ASSESSMENT YEAR. 9. THAT ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE AND HAVING REGARD TO THE EVIDENCES PLACED BEFORE THE LEARNED LOWER AUTHORITIES IT BE HELD TH AT THE CONSTRUCTION OF FIRST FLOOR (MEZZANINE FLOOR) P ORTION OF THE BUILDING WAS COMPLETED BEFORE 31.03.1999 AND THEREFORE THE INVESTMENT MADE IN THE SAID PORTION OF BUILDING IS NOT ASSESSABLE TO TAX IN THE IMPUGNED ASSESSMENT YEAR. 10. THAT ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE AND HAVING REGARD TO THE EVIDENCES PLACED BEFORE THE LEARNED LOWER AUTHORITIES IT BE HELD TH AT THE SECOND FLOOR THIRD FLOOR AND THE SMALL PORTIO N ON FOURTH & FIFTH FLOOR (FOR LIFT & ITS CONTROL PANEL PURPOSE) OF THE BUILDING WERE CONSTRUCTED DURING TH E -: 27: - 27 PERIOD 21.04.1999 TO 17.01.2001 AND THEREFORE THE INVESTMENT MADE IN THE SAID PORTION OF BUILDING IS ONLY REQUIRED TO BE CONSIDERED IN ASSESSMENT YEARS 2000-01 & 2001-02. 11. THAT ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE ASSESSEE IS NOT LIABLE FOR INTEREST U/S 234B & 234C. THE SAID LEVIES ARE UNLAWFUL AND THEREFORE BE CANCELLED. ITA NO.179/IND/2009 (AY: 2002-03) 14. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL: 1. THAT ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE THE DECISION IS CONTRARY TO LAW MATERIALLY INCORRECT AND UNSUSTAINABLE IN LAW AS WELL AS FACTS AND THAT ALL THE FINDINGS OF THE LEARNED LOWER AUTHORITIES THEREIN ARE ALSO CONTRARY TO THE EVIDEN CE AND INCORRECT. 3. THAT ON THE FACTS & IN CIRCUMSTANCES OF THE CASE AND IN LAW THE ISSUE OF NOTICE U/S L48 & THE RE- -: 28: - 28 ASSESSMENT MADE ARE UNLAWFUL AND WITHOUT JURISDICTION AND THEREFORE THE SAME BE CANCELLED. 4. THAT ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED LOWER AUTHORITIES ERRE D AND NOT JUSTIFIED IN ESTIMATING THE ASSESSEE'S SALE S AT RS.1 20 00 000/- AND APPLYING NET PROFIT @ 15% THEREON AND THUS ESTIMATING THE INCOME OF THE ASSESSEE AT RS.18 00 000/-. SUCH ESTIMATES ARE PURELY WILD GUESSWORK WITHOUT REFERENCE TO ANY EVIDENCE OR MATERIAL THEREFORE BE QUASHED AND THE BUSINESS INCOME AS SHOWN IN THE RETURN BE ACCEPTED. 5. THAT ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE REFERENCE TO VALUATION CELL FO R THE ASSESSMENT OF THE COST OF CONSTRUCTION BY THE A.O. TO THE DVO IS WHOLLY UNLAWFUL AND UNJUSTIFIED AND THE DVO'S REPORT BASED ON WRONG ASSUMPTION OF FACTS IS AN INADMISSIBLE EVIDENCE IN LAW HENCE THE ADDITION MADE AT RS.58 98 334/- ON THE BASIS OF SUCH ERRONEOUS REPORT IS UNLAWFUL AND UNJUSTIFIED AND THEREFORE BE DELETED. -: 29: - 29 6. THAT ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE REPORT OF THE DVO IS NOT BASED ON PROPER APPRECIATION OF THE FACTS AND THAT HE HA S WRONGLY TAKEN THAT THE FLOORS BASEMENT TO FIFTH FLO OR WERE CONSTRUCTED DURING THE PERIOD 1.4.99 TO 31.3.2003 AND HENCE SUCH REPORT IS NOT A RELIABLE PIECE OF EVIDENCE AND THE ADDITION MADE AT RS.58 98 334/- ON THE BASIS OF SUCH ERRONEOUS REPOR T IS UNLAWFUL AND UNJUSTIFIED. 7. THAT ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE METHOD OF VALUATION AS ADOPTED BY THE DVO IS WHOLLY ERRONEOUS AND INJUDICIOUS AS I T DID NOT TAKE INTO CONSIDERATION THE ACTUAL COST INCURRED BY THE ASSESSEE AND THE SAME IS ALSO NOT BASED ON THE STATE PWD CSR. THUS THE ESTIMATE OF THE COST OF CONSTRUCTION OF THE DVO IS NEITHER FAIR NOR JUDICIOUS NOR IT IS LAWFUL AND THEREFORE ADDITIO N MADE ON THE BASIS OF SUCH REPORT IS WHOLLY UNLAWFUL AND UNJUSTIFIED. 8. THAT ON THE FACTS & IN THE CIRCUMSTANCES OF THE -: 30: - 30 CASE AND IN LAW THE FINDINGS OF THE LEARNED CIT(A) THAT THE CONSTRUCTION WHICH WAS COMPLETED BEFORE 31.3.99 WERE DEMOLISHED ARE WHOLLY UNLAWFUL AND INCORRECT AND THE SAME THEREFORE BE QUASHED. 9. THAT ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE AND HAVING REGARD TO THE EVIDENCE PLACED BEFOR E THE LEARNED LOWER AUTHORITIES IT BE HELD THAT THE CONSTRUCTION BASEMENT AND THE GROUND FLOOR PORTION OF THE BUILDING WAS COMPLETED BEFORE 30.01.1987 AND THEREFORE THE INVESTMENT MADE IN THE SAID PORTION O F BUILDING IS NOT ASSESSABLE TO TAX IN THE IMPUGNED ASSESSMENT YEAR. 10. THAT ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE AND HAVING REGARD TO THE EVIDENCES PLACED BEFORE THE LEARNED LOWER AUTHORITIES IT BE HELD TH AT THE CONSTRUCTION OF FIRST FLOOR (MEZZANINE FLOOR) P ORTION OF THE BUILDING WAS COMPLETED BEFORE 31.03.1999 AND THEREFORE THE INVESTMENT MADE IN THE SAID PORTION OF BUILDING IS NOT ASSESSABLE TO TAX IN THE IMPUGNED ASSESSMENT YEAR. -: 31: - 31 11. THAT ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE AND HAVING REGARD TO THE EVIDENCES PLACED BEFORE THE LEARNED LOWER AUTHORITIES IT BE HELD TH AT THE SECOND FLOOR THIRD FLOOR AND THE SMALL PORTIO N ON FOURTH & FIFTH FLOOR (FOR LIFT & ITS CONTROL PANEL PURPOSE) OF THE BUILDING WERE CONSTRUCTED DURING TH E PERIOD 21.04.1999 TO 17.01.2001 AND THEREFORE THE INVESTMENT MADE IN THE SAID PORTION OF BUILDING IS ONLY REQUIRED TO BE CONSIDERED IN ASSESSMENT YEARS 2000-01 & 2001-02. 12. THAT ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE ASSESSEE IS NOT LIABLE FOR INTEREST U/S 234B & 234C. THE SAID LEVIES ARE UNLAWFUL AND THEREFORE BE CANCELLED. 15. THE FIRST COMMON GRIEVANCE OF THE ASSESSEE IN ALL THE YEARS RELATES TO VALIDITY OF REOPENING. THE CONTEN TION OF THE LEARNED COUNSEL FOR THE ASSESSEE WAS THAT THE RETUR NS FOR THE ASSESSMENT YEARS 2000-01 & 2001-02 WERE FILED ON 30 TH MARCH 2003 FOR ASSESSMENT YEAR 2002-03 RETURN WAS FILED ON -: 32: - 32 9.8.2003 THE FATE OF WHICH WAS NOT KNOWN AS TO WHE THER THESE RETURNS WERE PROCESSED U/S 143(1) OR ASSESSMENTS WE RE FRAMED U/S 143(3) OF THE ACT. AS PER THE LEARNED C OUNSEL FOR THE ASSESSEE LAST DATE OF LIMITATION FOR COMPLETIO N OF ASSESSMENT U/S 143(3) OF THE ACT AVAILABLE TO THE D EPARTMENT WAS 31 ST MARCH 2003 31 ST MARCH 2004 AND 31 ST MARCH 2005 FOR THE ASSESSMENT YEARS 2000-01 2001-02 AND 2002- 03 RESPECTIVELY. HOWEVER NOTICE FOR REOPENING OF ASS ESSMENT WAS ISSUED ON 28.3.2006. THE LEARNED COUNSEL FOR THE A SSESSEE DREW OUR ATTENTION TO THE REFERENCE MADE U/S 142A T O THE DVO ON 2.1.2006 ON WHICH DATE NO PROCEEDINGS OF ASSESSMENT/REASSESSMENT WERE PENDING. AFTER RECEIP T OF THE DVOS REPORT ON 9.3.2006 THE ASSESSING OFFICER HAS ISSUED NOTICE U/S 148 ON 28.3.2006 AND IN THESE NOTICES TH E ASSESSING OFFICER HAS ADOPTED THE SAME FIGURE AS ES CAPED INCOME WHICH THE DVO HAS DISTRIBUTED IN HIS LETTER TO THE ASSESSING OFFICER NO. DVO/BPL/IT-27/05-06/454 IN DI FFERENT FINANCIAL YEARS AS A COST OF BUILDING. THE CRUX OF GRIEVANCE OF THE ASSESSEE WAS THAT THE ASSESSING OFFICER HAS FIR ST REFERRED THE MATTER TO THE DVO FOR GATHERING INFORMATION FOR REOPENING -: 33: - 33 THE ASSESSMENT AND THEN AFTER THE RECEIPT OF THE DV OS REPORT NOTICES U/S 148 WERE ISSUED. RELIANCE WAS PLACED O N THE DECISION OF THE ITAT AHMEDABAD BENCH IN THE CASE O F UMIYA COOPERATIVE HOUSING SOCIETY LIMITED; 94 TTJ 392 WHE REIN IT WAS HELD THAT SECTION 142A EMPOWERS THE ASSESSING O FFICER TO REQUIRE THE VALUATION OFFICER FOR MAKING THE ESTIMA TE OF VALUE OF ANY ASSET PROVIDED THE ASSESSING OFFICER REQUIRE D THE SAME FOR PURPOSE OF MAKING THE ASSESSMENT OR REASSESSME NT. THIS PROVISION DOES NOT EMPOWER THE ASSESSING OFFICER TO REFER THE MATTER TO THE DVO FOR GATHERING INFORMATION FOR REO PENING OF ASSESSMENT. MAKING THE ASSESSMENT AND REOPENING OF ASSESSMENT ARE TWO DIFFERENT THINGS. WHEN THE PROCE SS OF REOPENING OF ASSESSMENT ENDS AND THE ASSESSMENT IS VALIDLY REOPENED THEREAFTER THE PROCESS OF MAKING THE ASSE SSMENT STARTS. IT WAS THEREFORE HELD THAT EVEN AFTER INSE RTION OF SECTION 142A THE ASSESSING OFFICER SHOULD HAVE REASON TO BE LIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT AS PROVIDED U/S 147 AND THEREAFTER ONLY THE NOTICE FOR REASSESSMENT CAN BE ISSUED U/S 148. IT WAS OBSERVE D THAT EVEN AFTER INSERTION OF SECTION 142A THERE IS NO AM ENDMENT IN -: 34: - 34 THE LANGUAGE OF SECTION 147 THEREFORE THE CONDITION PRESCRIBED U/S 147 FOR REOPENING OF ASSESSMENT STILL EXISTS. ACCORDINGLY THE TRIBUNAL HELD THAT NOTICES ISSUED U/S 148 WERE NOT IN ACCORDANCE WITH LAW THE SAME WERE QUASHED AND CONSEQUENTLY THE ASSESSMENTS COMPLETED IN PURSUANCE TO THE NOTICES U/S 148 WERE QUASHED THE LEARNED COUNSEL F OR THE ASSESSEE FURTHER SUBMITTED THAT THIS DECISION WAS F OLLOWED BY THE ITAT LUCKNOW BENCH IN THE CASE OF VIJETA EDUCA TION SOCIETY; 118 ITD 328 AND FURTHER THE SAME PRINCIPLE OF LAW WAS FOLLOWED BY THE ITAT JAIPUR BENCH IN THE CASE OF GOVARDHAN BUILDERS; 29 SOT 72. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO PLACED RELIANCE ON THE DECISION OF TH E JURISDICTIONAL HIGH COURT IN THE CASE OF CHOUDHARY BUILDERS PVT. LTD.; 209 CTR 133 WHEREIN IT WAS HELD THAT COM MISSION ISSUED TO THE DVO U/S 131(1)(D) TO ASCERTAIN THE CO ST OF CONSTRUCTION WAS INVALID WHERE NO ASSESSMENT PROCEE DINGS WERE PENDING ON THE DATE OF ISSUE OF COMMISSION. A S PER THE LEARNED COUNSEL FOR THE ASSESSEE M.P. HIGH COURT A LSO IN ANOTHER CASE OF NEVENDRAM AHUJA; 290 ITR 453 HELD T HAT COMMISSION U/S 131(1)(D) COULD BE ISSUED BY THE ASS ESSING -: 35: - 35 OFFICER ONLY DURING THE PENDENCY OF THE ASSESSMENT PROCEEDINGS AND THE REFERENCE BY THE ASSESSING OFFI CER TO THE DVO BEING PRIOR TO THE INITIATION OF ASSESSMENT PRO CEEDINGS WAS NOT VALID AND CONSEQUENTLY THE VALUATION REPORT OF THE DVO CANNOT BE MADE USE FOR MAKING ANY ADDITION U/S 69 IN RESPECT OF UNEXPLAINED INVESTMENT IN CONSTRUCTION O F THE BUILDING. 16. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO PLACED RELIANCE ON THE DECISION OF THE ITAT INDORE BENCH IN THE CASE OF PADAM SINGH REPORTED IN 10 ITJ 460 WHEREIN IT W AS HELD THAT SINCE NO PROCEEDINGS WERE PENDING BEFORE THE A SSESSING OFFICER FOR THE ASSESSMENT YEAR UNDER APPEAL THE R EFERENCE TO THE DVO TO ASCERTAIN THE COST OF CONSTRUCTION ITSEL F WAS INVALID AND BAD IN LAW. IT WAS THEREFORE HELD BY THE TRI BUNAL THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING R EFERENCE TO THE DVO TO ASCERTAIN THE COST OF CONSTRUCTION. RE SULTANTLY THE ASSESSING OFFICER WAS NOT JUSTIFIED IN REOPENIN G THE ASSESSMENT ON THE BASIS OF REPORT OBTAINED FROM THE DVO UNDER AN INVALID REFERENCE. IN VIEW OF ALL THESE S UBMISSIONS AND DECISIONS LEARNED COUNSEL FOR THE ASSESSEE ARG UED THAT -: 36: - 36 REASSESSMENT PROCEEDINGS ARE INVALID AND WITHOUT JU RISDICTION THEREFORE REASSESSMENT MADE IN ALL THE THREE YEARS 2000-1 TO 2002-03 BE CANCELLED. 17. ON THE OTHER HAND THE CONTENTION OF THE LEARNED CIT DR WAS THAT WHILE REOPENING THE ASSESSMENT SUFFICI ENCY OF REASONS IS TO BE SEEN AS HELD IN THE CASE OF PHOOLC HAND; 203 ITR 456. AS PER THE LEARNED COUNSEL FOR THE REVENU E SINCE THERE WAS ESCAPEMENT OF INCOME IN RESPECT OF COST O F CONSTRUCTION ESTIMATED BY THE DVO THE ASSESSING O FFICER WAS JUSTIFIED IN REOPENING THE ASSESSMENT FOR SUCH ESCA PED INVESTMENT. AS PER THE LEARNED CIT DR THE RETURNS SO FILED BY THE ASSESSEE WERE PROCURED U/S 143(1) AND NO SCRUTI NY ASSESSMENT WAS FRAMED U/S 143(3) THEREFORE THERE IS NOTHING WRONG FOR REOPENING FOR THE RELEVANT ASSESSMENT YEA R IN RESPECT OF ESCAPED INCOME INVESTED IN BUILDING. WI TH REGARD TO VALIDITY OF REOPENING LEARNED CIT DR DREW OUR ATT ENTION TO THE OBSERVATION OF THE LEARNED COMMISSIONER OF INCO METAX (APPEALS) IN THE APPELLATE ORDER AT PAGE 4.2 WHEREI N IT WAS OBSERVED THAT THE EXPRESSION REASON TO BELIEVE RE INTRODUCED IN SECTION 47 BY THE AMENDING ACT 1989 IS WELL SET TLED -: 37: - 37 THROUGH A PLETHORA OF RULING. IT IS NOT A CONDITIO N PRECEDENT THAT THE ASSESSING OFFICER SHOULD CONVENE THE ASSES SEE OR TO INTIMATE TO HIM THE NATURE OF THE ALLEGED ESCAPEMEN T OR TO GIVE HIM AN OPPORTUNITY OF BEING HEARD BEFORE HE DECIDED TO OPERATE THE POWERS CONFERRED BY THE SECTION. IT WA S ALSO OBSERVED THAT THE EXPRESSION REASON TO BELIEVE PO STULATES BELIEF AND THE EXISTENCE OF REASONS FOR THAT BELIEF . THE BELIEF MUST BE HELD IN GOOD FAITH IT CANNOT BE MERELY A P RETENCE. THE SATISFACTION OF THE ASSESSING OFFICER FOR PURPOSE O F REOPENING OF ASSESSMENT IS SUBJECTIVE IN CHARACTER AND THE SCOPE OF APPELLATE REVIEW IS LIMITED. WHEN THE REASONS RECO RDED SHOW A NEXUS BETWEEN FORMATION OF BELIEF AND THE ESCAPEMEN T OF INCOME A FURTHER ENQUIRY ABOUT THE ADEQUACY OR SUF FICIENCY OF THE MATERIAL TO REACH SUCH BELIEF IS NOT OPEN TO SC RUTINY. IT WAS ALSO OBSERVED THAT THE ASSESSING OFFICERS REAS ONING MAY BE THE RESULT OF OFFICIAL INFORMATION OR HIS OWN OR MAY COME FROM ANY SOURCE THAT HE CONSIDERS RELIABLE HIS REA SONS ARE NOT TO BE JUDGED BY A COURT BY THE STANDARD OF WHAT THE IDEAL MAN WOULD THINK. HE IS THE ACTUAL MAIN TRUSTED BY THE LEGISLATURE AND CHARGED WITH THE DUTY OF FORMING A BELIEF FOR T HE MERE -: 38: - 38 PURPOSE OF DETERMINING WHETHER HE SHOULD PROCEED TO COLLECT WHAT IS STRICTLY DUE BY LAW. IF THE ASSESSING OFFI CER HONESTLY COMES TO A CONCLUSION THAT A MISTAKE HAS BEEN MADE IT MATTERS NOTHING SO AS HIS JURISDICTION TO INITIATE THE PROCEEDINGS U/S 147 IS CONCERNED THAT HE MAY HAVE C OME TO ALL ERRONEOUS CONCLUSION WHETHER OF LAW OR FACTS. THE JURISDICTION TO INITIATE PROCEEDINGS U/S 147 FOR AS SESSMENT AND REASSESSMENT IS EVEN IN SUCH CASES CORRECTLY AND RI GHTLY EXERCISED THOUGH HE MAY HAVE TAKEN AN ERRONEOUS VIE W OF LAW WITH REGARD TO MISTAKE COMMITTED AT THE ASSESSMENT PROCEEDINGS THAT HE HAS FOUND IT. THEREFORE UNLES S IT IS SHOWN THAT THE ASSESSING OFFICER INQUIRED THE MATTE R AT ILL OR THAT HE NEVER HONESTLY BELIEVED THAT A MISTAKE HAS BEEN MADE THE RESULT OF HIS INVESTIGATION AND INITIATION OF P ROCEEDINGS U/S 147 OF THE ACT CANNOT BE CHALLENGED ON THE GROUND O F WANT OF JURISDICTION. 18. IN VIEW OF THESE OBSERVATIONS OF THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS) THE CONTENTION OF LEARNED CIT DR WAS THAT THE ASSESSMENTS WERE VALID LY REOPENED. -: 39: - 39 19. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND ALSO DELIBERATED ON THE DECISIONS CITED BY THE LEARNED C OUNSEL FOR THE ASSESSEE WITH REFERENCE TO THE ISSUE OF NOTICE U/S 148 AND VALIDITY OF REASSESSMENT U/S 147 ON THE BASIS OF DV OS REPORT. RECENTLY THE HONBLE SUPREME COURT IN THE CASE OF RAJESH JHAVERI STOCK BROKERS PRIVATE LIMITED; 291 ITR 500 HELD THAT AT THE TIME OF ISSUE OF NOTICE IT IS SUFFICIENT TH AT PRIMA FACIE REASONS AND MATERIAL SHOULD BE WITH THE ASSESSING O FFICER THAT THERE IS ESCAPEMENT OF SOME INCOME. AT THE TIME OF ISSUE OF NOTICE THE ASSESSING OFFICER IS NOT REQUIRED TO CO NCLUSIVELY ESTABLISH THAT THERE IS ESCAPEMENT OF INCOME. MERE BONA FIDE REASON TO BELIEVE THAT THERE IS ESCAPEMENT OF INCOM E IS SUFFICIENT FOR ISSUE OF NOTICE U/S 148. HONBLE SU PREME COURT FURTHER OBSERVED THAT THE EXPRESSION REASON TO BEL IEVE IN SECTION 147 WOULD MEAN CAUSE OR JUSTIFICATION. IF THE ASSESSING OFFICER HAS CAUSED OR JUSTIFIED TO KNOW O R SUPPOSE THAT INCOME HAD ESCAPED ASSESSMENT HE CAN BE SAID TO HAVE REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMEN T. THE EXPRESSION CANNOT BE READ TO MEAN THAT THE ASSESSIN G OFFICER SHOULD HAVE FINALLY ASCERTAINED THE FACTS BY LEGAL EVIDENCE OR -: 40: - 40 CONCLUSION. WHAT IS REQUIRED IS REASON TO BELIEVE BUT NOT THE ESTABLISHED FACT OF CONCEALMENT OF INCOME. AT THE S TAGE OF ISSUE OF NOTICE THE ONLY QUESTION WHETHER THERE WA S RELEVANT MATERIAL ON WHICH A REASONED PERSON SHOULD HAVE FOR MED THE REQUISITE BELIEF. WHETHER MATERIAL WOULD CONCLUSIVE LY PROVE ESCAPEMENT OF INCOME IS NOT THE CONCERN AT THAT STA GE. THIS IS SO BECAUSE THE FORMATION OF THE BELIEF IS WITHIN TH E REALM OF SUBJECTIVE SATISFACTION OF THE ASSESSING OFFICER. 20. LD.AUTHORIZED REPRESENTATIVE ALSO CONTENDED THAT W HILE HOLDING WHETHER IN A CASE WHERE ASSESSMENT IS MAD E U/S 143(1) AND NOT U/S 143(3) IT IS NOT POSSIBLE TO HOL D VIEW THAT INCOME ESCAPING ASSESSMENT IS ALWAYS JUSTIFIED. HON 'BLE SUPREME COURT IN THE CASE OF RAJESH JHAVERI STOCK B ROKERS PRIVATE LIMITED (SUPRA) ALSO HELD THAT IN CASE OF INTIMATION U/S 143(1) THE AO CAN REOPEN THE ASSESSMENT IF THE RE ARE REASONS TO BELIEVE THAT INCOME OF ASSESSEE HAS ESCA PED ASSESSMENT. THE CRUX OF THE PROVISIONS OF SEC.143(1 ) UP TO 31 ST MARCH 1989 WAS THAT AFTER A RETURN OF INCOME WAS FILED THE ASSESSING OFFICER COULD MAKE AN ASSESSMENT UNDER SE CTION 143(1) WITHOUT REQUIRING PRESENCE OF THE ASSESSEE O R -: 41: - 41 PRODUCTION BY HIM OF ANY EVIDENCE IN SUPPORT OF THE RETURN. WHERE THE ASSESSEE OBJECTED TO SUCH ASSESSMENT OR W HERE THE OFFICER WAS OF THE OPINION THAT THE ASSESSMENT WAS INCORRECT OR INCOMPLETE OR THE OFFICER DID NO COMPLETE THE ASSES SMENT UNDER SECTION 143(1) BUT WANTED TO MAKE AN INQUIRY A NOTICE UNDER SECTION 143(2) WAS REQUIRED TO BE ISSUED TO T HE ASSESSEE REQUIRING HIM TO PRODUCE EVIDENCE IN SUPPORT OF HIS RETURN. AFTER CONSIDERING THE MATERIAL AND EVIDENCE PRODUCE D AND AFTER MAKING NECESSARY INQUIRIES THE OFFICER HAD P OWER TO MAKE ASSESSMENT UNDER SECTION 143(3). 21. WITH EFFECT FROM 1 ST APRIL 1989 THE PROVISIONS UNDERWENT SUBSTANTIAL AND MATERIAL CHANGES. A NEW SCHEME WAS INTRODUCED AND THE NEW SUBSTITUTED SECTION 143( 1) PRIOR TO SUBSEQUENT SUBSTITUTION WITH EFFECT FROM 1ST JUN E 1999 IN CLAUSE(A) A PROVISION WAS MADE THAT WHERE A RETURN WAS FILED UNDER SECTION 139 OR IN RESPONSE TO A NOTICE UNDER SECTION 142(1) AND ANY TAX OR REFUND WAS FOUND DUE ON THE B ASIS OF SUCH RETURN AFTER ADJUSTMENT OF TAX DEDUCTED AT SOU RCE ANY ADVANCE TAX OR ANY AMOUNT PAID OTHERWISE BY WAY OF TAX OR INTEREST AN INTIMATION WAS TO BE SENT U/S 143(1)( A) WITHOUT -: 42: - 42 PREJUDICE TO THE PROVISIONS OF SECTION 143(2) TO TH E ASSESSEE SPECIFYING THE SUM SO PAYABLE AND SUCH INTIMATION W AS DEEMED TO BE A NOTICE OF DEMAND ISSUED UNDER SECTIO N 156. THE FIRST PROVISO TO SECTION 143(1)(A) ALLOWED THE DEPARTMENT TO MAKE CERTAIN ADJUSTMENTS IN THE INCOME OR LOSS DECL ARED IN THE RETURN. THEY WERE AS FOLLOWS: A) AN ARITHMETICAL ERROR IN THE RETURN ACCOUNTS AND DOCUMENTS ACCOMPANYING IT WERE TO BE RECTIFIED. B) ANY LOSS CARRIED FORWARD DEDUCTIONS ALLOWANCE OR RELIEF WHICH ON THE BASIS OF THE INFORMATION AVAILA BLE IN SUCH RETURN ACCOUNTS OR DOCUMENTS WAS PRIMA FACIE ADMISSIBLE BUT WHICH WAS NOT CLAIMED IN THE RETURN WAS TO BE ALLOWED; AND C) ANY LOSS CARRIED FORWARD RELIEF CLAIMED IN THE RET URN WHICH ON THE BASIS OF THE INFORMATION AS AVAILABLE IN SUCH RETURN ACCOUNTS OR DOCUMENTS WERE PRIMA FACIE INADMISSIBLE WAS TO BE DISALLOWED. 22. WHAT WERE PERMISSIBLE UNDER THE FIRST PROVISO TO SECTION 143(1)(A) TO BE ADJUSTED WERE (I) ONLY APPA RENT ARITHMETICAL ERRORS IN THE RETURN ACCOUNTS OR DOCU MENTS -: 43: - 43 ACCOMPANYING THE RETURN (II) LOSS CARRIED FORWARD DEDUCTION ALLOWANCE OR RELIEF WHICH WAS PRIMA FACIE ADMISSIB LE ON THE BASIS OF INFORMATION AVAILABLE IN THE RETURN BUT NO T CLAIMED IN THE RETURN AND SIMILARLY (III) THOSE CLAIMS WHICH WERE ON THE BASIS OF THE INFORMATION AVAILABLE IN THE RETURN P RIMA FACIE INADMISSIBLE WERE TO BE RECTIFIED/ALLOWED/DISALLOW ED. WHAT WAS PERMISSIBLE FOR CORRECTION OF ERRORS APPARENT O N THE BASIS OF THE DOCUMENTS ACCOMPANYING THE RETURN? THE ASSE SSING OFFICER HAD NO AUTHORITY TO MAKE ADJUSTMENTS OR ADJ UDICATE UPON ANY DEBATABLE ISSUE. IN OTHER WORDS THE ASSE SSING OFFICER HAD NO POWER TO GO BEHIND THE RETURN ACCOU NTS OR DOCUMENTS EITHER IN ALLOWING OR IN DISALLOWING DEDU CTION ALLOWANCE OR RELIEF. 23. THE PROVISIONS OF SECTION 143(1)(A) ARE WITHOUT PREJUDICE TO THE PROVISIONS OF SECTION 143(2). THO UGH TECHNICALLY THE INTIMATION ISSUED WAS DEEMED TO BE A DEMAND NOTICE ISSUED UNDER SECTION 156 THAT DID NOT PER SE PRECLUDE THE RIGHT OF THE ASSESSING OFFICER TO PROCEED UNDER SECTION 143(2). THAT RIGHT IS RESERVED AND NOT TAKEN AWAY. BETWEEN THE PERIOD FROM 1 ST APRIL 1989 TO 31 ST MARCH 1998 THE SECOND -: 44: - 44 PROVISO TO SECTION 143(1)(A) REQUIRED THAT WHERE A DJUSTMENTS WERE MADE UNDER FIRST PROVISO TO SECTION 143(1)(A) AN INTIMATION HAD TO BE SENT TO THE ASSESSEE NOTWITHST ANDING THAT NO TAX OR REFUND WAS DUE FROM HIM AFTER MAKING SUCH ADJUSTMENTS. WITH EFFECT FROM 1 ST APRIL 1998 SECOND PROVISO TO SECTION 143(1)(A) WAS SUBSTITUTED BY THE FINANC E ACT 1997 WHICH WAS OPERATIVE TILL 1 ST JUNE 1999. THE REQUIREMENT WAS THAT INTIMATION WAS TO BE SENT TO THE ASSESSEE WHET HER OR NOT ANY ADJUSTMENTS HAD BEEN MADE UNDER THE FIRST PROVI SO TO SECTION 143(1) AND NOTWITHSTANDING THAT NO TAX OR I NTEREST WAS FOUND DUE FROM THE ASSESSEE CONCERNED. BETWEEN 1 ST APRIL 1998 TO 31 ST MARCH 1999 SENDING OF AN INTIMATION UNDER SECTION 143(1)(A) WAS MANDATORY. 24. THUS LEGISLATIVE INTENT IS VERY CLEAR FROM THE US E OF THE WORD INTIMATION AS SUBSTITUTED FOR ASSESSMENT THE ASSESSING OFFICER IS FREE TO MAKE ANY ADDITION AFTE R GRANT OF OPPORTUNITY TO THE ASSESSEE. BY MAKING ADJUSTMENTS UNDER THE FIRST PROVISO TO SECTION 143(1)(A) NO ADDITION WHICH IS IMPERMISSIBLE BY THE INFORMATION IN THE RETURN COUL D BE MADE BY THE ASSESSING OFFICER. REASON IS THAT UNDER SEC TION -: 45: - 45 143(1)(A) NO OPPORTUNITY IS GRANTED TO THE ASSESSE E AND THE ASSESSING OFFICER PROCEEDS ON HIS OPINION ON THE BA SIS OF THE RETURN FILED BY THE ASSESSEE. THE VERY FACT THAT N O OPPORTUNITY OF HEARING BEING GIVEN UNDER SECTION 143(1)(A) INDI CATES THAT THE ASSESSING OFFICER HAS TO PROCEED ACCEPTING THE RETURN AND MAKING THE PERMISSIBLE ADJUSTMENTS ONLY. 25. AS A RESULT OF INSERTION OF EXPLANATION TO SECTION 143 BY THE FINANCE ACT (NO.2) OF 1991 WITH EFFECT FROM 1-1 0-1991 AND SUBSEQUENTLY WITH EFFECT FROM 1-6-1994 BY FINANCE ACT 1994 AND ULTIMATELY OMITTED WITH EFFECT FROM 1-6-1999 BY EXPLANATION AS INTRODUCED BY THE FINANCE ACT (NO.2) OF 1999 AN INTIMATION SENT TO THE ASSESSEE UNDER SECTION 1 43(1)(A) WAS DEEMED TO BE AN ORDER FOR PURPOSES OF SECTION 246 B ETWEEN 1- 6-94 TO 31-3-95 AND UNDER SECTION 264 BETWEEN 1-10 -1991 AND 31-5-1999. THE EXPRESSIONS INTIMATION AND A SSESSMENT ORDER HAVE BEEN USED AT DIFFERENT PLACES. CONTEXT UAL DIFFERENCE BETWEEN THE TWO EXPRESSIONS HAS TO BE UN DERSTOOD IN THE CONTEXT OF THE EXPRESSIONS USED. ASSESSMENT IS USED AS MEANING SOME TIMES THE COMPUTATION OF INCOME SOME TIMES THE DETERMINATION OF THE AMOUNT OF TAX PAYABLE AN D SOME -: 46: - 46 TIMES THE WHOLE PROCEDURE LAID DOWN IN THE ACT FOR IMPOSING LIABILITY UPON THE TAX PAYER. IN THE SCHEME OF TH INGS THE INTIMATION UNDER SECTION 143(1)(A) CANNOT BE TREATE D TO BE AN ORDER OF ASSESSMENT. THE DISTINCTION IS ALSO WELL BROUGHT OUT BY THE STATUTORY PROVISIONS AS THEY STOOD AT DIFFER ENT POINTS OF TIME. UNDER SECTION 143(1)(A) AS STOOD PRIOR TO 1 ST APRIL 1989 THE ASSESSING OFFICER HAD TO PASS AN ORDER IF HE DE CIDED TO ACCEPT THE RETURN BUT UNDER THE AMENDED PROVISIONS THE REQUIREMENT OF PASSING OF AN ASSESSMENT ORDER HAS B EEN DISPENSED WITH AND INSTEAD AN INTIMATION IS REQUIRE D TO BE SENT. 26. THE CENTRAL BOARD OF DIRECT TAXES (CBDT) HAD ISSUE D VARIOUS CIRCULARS IN THIS REGARD EXPLAINING THE PUR POSE BEHIND THE PROVISIONS OF SECTION 143(1)(A) NAMELY TO MI NIMIZE THE DEPARTMENTAL WORK IN SCRUTINIZING EACH AND EVERY RE TURN AND TO CONCENTRATE ON SELECTIVE SCRUTINY OF RETURNS. 27. UNDER THE FIRST PROVISO TO SECTION 143(1) WITH EFF ECT FROM 1 ST JUNE 1999 EXCEPT AS PROVIDED IN THE PROVISION ITS ELF THE ACKNOWLEDGMENT OF THE RETURN SHALL BE DEEMED TO BE INTIMATION UNDER SECTION 143(1) WHERE (A) EITHER NO SUM IS -: 47: - 47 PAYABLE BY THE ASSESSEE OR (B) NO REFUND IS DUE TO HIM. IT IS SIGNIFICANT THAT THE ACKNOWLEDGEMENT IS MOSTLY DONE BY THE MINISTERIAL STAFF AND NOT BY THE ASSESSING OFFICER. THUS THE INTIMATION DOES NOT HAVE ALL THE CHARACTERISTICS OF AN ASSESSMENT AS UNDERSTOOD IN THE COMMON PARLANCE OR EVEN DURING TAXING STATUTES. FURTHER THE INTIMATION UN DER SECTION 143(1)(A) WAS DEEMED TO BE A NOTICE OF DEMAND UNDER SECTION 156 FOR THE PURPOSE OF MAKING MACHINERY PROVISIONS RELATING TO RECOVERY OF TAX APPLICABLE. BY SUCH APPLICATION ONLY TAX AMOUNT INDICATED TO BE PAYABLE BY THE INTIMATION BE CAME PERMISSIBLE AND NOTHING MORE CAN BE INFERRED FROM T HE DEEMING SECTION. 28. ON A COMPARISON OF THE PROVISIONS AS IT STOOD BEFO RE THE DIRECT TAX LAWS (AMENDMENT) ACT 1987 AND THE PROVISIONS AS SUBSTITUTED BY THE DIRECT TAX LAWS (A MENDMENT) ACT 1987 IT WOULD BE CLEAR THAT: - THE SCOPE AND EFFECT OF SECTION 147 AS SUBSTITUTED WITH EFFECT FROM 1 ST APRIL 1989 AS ALSO SECTIONS 148 TO 152 ARE SUBSTANTIALLY DIFFERENT FROM THE PROVISIONS AS STOO D PRIOR TO SUCH SUBSTITUTION. -: 48: - 48 29. UNDER OLD PROVISIONS OF SECTION 147 SEPARATE CLAU SES (A) AND (B) LAID DOWN THE CIRCUMSTANCES UNDER WHICH INCOME ESCAPING ASSESSMENT FOR THE PAST ASSESSMENT YEARS C OULD BE ASSESSED OR REASSESSED. TO CONFER JURISDICTION UND ER SECTION 147(A) TWO CONDITIONS WERE REQUIRED TO BE SATISFIED : FIRSTLY THE ASSESSING OFFICER MUST HAVE REASON TO BELIEVE THAT INCOME PROFITS OR GAINS CHARGEABLE TO INCOME-TAXABLE HAVE ESCAPED ASSESSMENT AND SECONDLY HE MUST ALSO HAVE REASON TO BELIEVE THAT SUCH ESCAPEMENT HAS OCCURRED BY REASON OF EITH ER OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY OR TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSES SMENT OF THAT YEAR. BOTH THESE CONDITIONS ARE CONDITIONS PRECEDE NT TO BE SATISFIED BEFORE THE ASSESSING OFFICER COULD HAVE J URISDICTION TO ISSUE NOTICE UNDER SECTION 148 READ WITH SECTION 14 7(A). BUT UNDER THE SUBSTITUTED NEW SECTION 147 THE EXISTENC E OF ONLY THE FIRST CONDITION WOULD SUFFICE. IN OTHER WORDS IF THE ASSESSING OFFICER FOR WHATEVER REASON HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT IT CONFERS JURI SDICTION TO REOPEN THE ASSESSMENT. IT IS HOWEVER TO BE NOTED THAT BOTH -: 49: - 49 THE CONDITIONS MUST BE FULFILLED IF THE CASE FALLS WITHIN THE AMBIT OF PROVISO TO SECTION 147 AS STOOD AFTER AMEN DMENT. 30. THUS AS PER THE AMENDED PROVISIONS OF SEC.147 FOR RE- OPENING OF AN ASSESSMENT THERE SHOULD BE A REASON T O BELIEVE THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMEN T FOR ANY ASSESSMENT YEAR. SUCH REASON TO BELIEVE CAN BE RA ISED IN ANY MANNER AND IS NOT QUALIFIED BY A PRE-CONDITION OF F AITH AND TRUE DISCLOSURE OF MATERIAL FACTS BY AN ASSESSEE AS CONTEMPLATED IN PRE-AMENDED SECTION 147(A) AND THE ASSESSING OFFICER CAN UNDER THE AMENDED PROVISIONS LEGITIMATELY RE-OPEN THE ASSESSMENT IN RESPECT OF I NCOME WHICH HAD ESCAPED ASSESSMENT. VIEWED IN THAT ANGLE POWER TO RE-ASSESSMENT IS MUCH WIDER UNDER THE AMENDED PR OVISIONS AND CAN BE EXERCISED EVEN AFTER ASSESSEE HAS DISCLO SED FULLY AND TRULY ALL MATERIAL FACTS. REASONS WHICH MAY WE IGH WITH THE ASSESSING OFFICER MAY BE THE RESULT OF HIS OWN INVESTIGATION AND MAY ALSO COME FROM ANY SOURCE THA T HE CONSIDERS RELIABLE. FORMING OF THIS BELIEF IS AN A DMINISTRATIVE DECISION TO BE ARRIVED AT IN JUDICIAL MANNER. THE ASSESSING OFFICER IS REQUIRED TO ACT FAIRLY AND JUDICIOUSLY. HIS BELIEF MUST -: 50: - 50 HAVE SUBSTANCE AND MUST NOT BE A SHADOW. THERE IS NO DISPUTE TO THE WELL SETTLED LEGAL PROPOSITION THAT SUCH BELIEF SHOULD BE BONA FIDE AND SHOULD NOT BE BASED ON VAGU E ARBITRARY AND NON-SPECIFIC INFORMATION. 31. IN THE CASE OF RAJESH JHAVERI HON'BLE SUPREME COU RT CATEGORICALLY DEALT WITH REOPENING OF ASSESSMENT WI TH REGARD TO MODE UNDER WHICH ASSESSMENT HAS BEEN DONE EITHER B Y WAY OF THE INTIMATION U/S 143(1) OR BY WAY OF SCRUTINY ASSESSMENT ORDER U/S 143(3). IT WAS OBSERVED THAT THERE IS A C ONTEXTUAL DIFFERENCE BETWEEN THE TWO EXPRESSIONS IN THE CONTE XT THE EXPRESSIONS ARE USED. THE WORD ASSESSMENT IS USED AS MEANING SOMETHING THE COMPUTATION OF INCOME SOME TIMES DETERMINATION OF AMOUNT OF TAX PAYABLE AND SOMETI MES THE WHOLE PROCEDURE LAID DOWN IN THE ACT FOR IMPOSING L IABILITY UPON THE TAX PAYERS. IT WAS FURTHER OBSERVED THAT I N THE SCHEME OF THINGS THE INTIMATION U/S 143(1)(A) CANN OT BE TREATED TO BE AN ORDER OF ASSESSMENT. THIS DISTINCT ION IS ALSO WELL BROUGHT OUT BY THE STATUTORY PROVISIONS AS THE Y STOOD AT DIFFERENT POINTS OF TIME PRIOR TO 1 ST APRIL 1989 U/S 143(1)(A) THE AO HAD TO PASS AN ASSESSMENT ORDER IF HE DECIDE D TO -: 51: - 51 ACCEPT THE RETURN BUT UNDER THE AMENDED PROVISIONS THE REQUIREMENT OF PASSING OF AN ASSESSMENT ORDER HAS T O BE DISPENSED WITH AND INSTEAD OF IT AN INTIMATION IS R EQUIRED TO BE SENT. IT WAS FURTHER ELABORATED THAT UNDER THE FIRS T PROVISO TO THE NEWLY SUBSTITUTED SECTION 143(1) W.E.F. 1 ST JUNE 1999 EXCEPT AS PROVIDED IN THE PROVISION ITSELF ACKNOWL EDGEMENT OF THE RETURN SHALL BE DEEMED TO BE INTIMATION U/S 143 (1) WHERE NO SUM IS PAYABLE BY THE ASSESSEE OR WHERE NO REFUN D IS DUE TO HIM. IT WAS CATEGORICALLY OBSERVED THAT ACKNOWLE DGEMENT IS NOT DONE BY THE ASSESSING OFFICER BUT BY THE MINIS TERIAL STAFF. UNDER THESE CIRCUMSTANCES IT CANNOT BE SAID THAT T HE ASSESSMENT HAS BEEN MADE BY THE MINISTERIAL STAFF. THE INTIMATION U/S 143(1)(A) IS DEEMED TO BE A NOTICE O F DEMAND U/S 156. FOR THE APPARENT PURPOSE OF MAKING MACHINE RY PROVISION RELATING TO RECOVERY OF TAX APPLICABLE. B Y SUCH APPLICATION ONLY RECOVERY INDICATED TO BE PAYABLE I N THE INTIMATION BECOMES PERMISSIBLE AND NOTHING MORE CAN BE INFERRED FROM THE DEEMING PROVISION. THUS THERE IS NO ASSESSMENT U/S 143(1)(A) OF THE ACT. -: 52: - 52 32. IT IS CRYSTAL CLEAR FROM THE ABOVE DECISION OF THE HON'BLE SUPREME COURT WHICH IS HAVING BINDING EFFECT ON US UNDER CONSTITUTION OF INDIA THAT THE PROCESSING OF RETURN U/S 143(1) DOES NOT AMOUNT TO ASSESSMENT ORDER. THEREFORE NEI THER ANY OPINION IS FORMED NOR THERE IS A QUESTION OF CHANGE OF OPINION. SINCE INTIMATION U/S 143(1) IS NOT AN ASSESSMENT T HERE IS NO QUESTION OF ANY NEW MATERIAL TO EMPOWER THE AO TO R EOPEN THE ASSESSMENT U/S 147 WHEN THERE IS A REASON TO BELIE VE THAT THERE IS ESCAPEMENT OF INCOME. IN THE INSTANT CASE BEFORE US THE RETURN FOR ALL THE YEARS WERE PROCESSED U/S 143 (1) AND NO ASSESSMENT WAS FRAMED BY ISSUE OF NOTICE U/S 143(2) . UNDER THESE FACTS AND CIRCUMSTANCES THE PROPOSITION OF L AW LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF RA JESH JHAVERI IS CLEARLY APPLICABLE. IT IS PERTINENT TO M ENTION HERE THAT SECTION 147 AUTHORIZES THE AO TO ASSESS OR REA SSESS INCOME CHARGEABLE TO TAX WHEN HE HAS REASON TO BE LIEVE THAT INCOME FOR ANY ASSESSMENT YEAR HAS ESCAPED ASSESSME NT. 33. AFTER GOING THROUGH THE REASONS RECORDED FOR REOPE NING WE ARE SATISFIED THAT THE LEARNED COMMISSIONER OF I NCOMETAX (APPEALS) WAS JUSTIFIED IN HOLDING THAT THE REOPENI NG OF -: 53: - 53 ASSESSMENT WAS VALID. IN VIEW OF THIS LATEST DECIS ION OF THE HONBLE SUPREME COURT WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED COMMISSIONER OF INCOMETAX (APP EALS) IN UPHOLDING THE REASSESSMENT PROCEEDINGS AS VALID PRO CEEDINGS. 34. IN THE RESULT THE GROUNDS TAKEN BY THE ASSESSEE W ITH REGARD TO VALIDITY OF REOPENING OF ASSESSMENT IN AL L THE YEARS ARE DISMISSED. 35. THE NEXT COMMON GRIEVANCE OF THE ASSESSEE IN ALL T HE YEARS RELATES TO VALIDITY OF REFERENCE MADE TO THE DVO U/S 142A OF THE ACT. IN THIS REGARD CHRONOLOGICAL DA TE FOR FILING THE RETURNS DATE OF INTIMATION U/S 143(1) LAST DA TE OF LIMITATION FOR ASSESSMENT U/S 143(3) DATE OF REFER ENCE U/S 142A DATE OF DVOS REPORT AND DATE OF ISSUE OF NOT ICE U/S 148 ARE AS UNDER :- ASSESSMENT YEARS S.NO. PARTICULARS 2000- 01 2001- 02 2002- 03 1 DUE DATE OF RETURN U/S 139 2 RETURN FILED ON 30.3.02 30.3.02 9.8.02 3 DATE OF INTIMATION U/S 143(1)/ASSESSMENT U/S 143(3) NOT KNOWN NOT KNOWN NOT KNOWN 4 LAST DATE OF LIMITATION FOR 31.3.03 31.3.04 31.3.05 -: 54: - 54 ASSESSMENT U/S 143(3) AVAILABLE 5 DATE OF REFERENCE U/S 142A 2.1.06 2.1.06 2.1.06 6 DATE OF DVOS REPORT 9.3.06 9.3.06 9.3.06 7 DATE OF ISSUE OF NOTICE U/S 148 28.3.06 28.3.06 28.3.06 36. THERE IS NO DISPUTE TO THE RELEVANT DATES MENTIONE D HEREINABOVE. ON THE BASIS OF THESE DATES THE CONT ENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE WAS THAT REFER ENCE WAS MADE ON THE DATE WHEN NO PROCEEDINGS WERE PENDING B EFORE THE ASSESSING OFFICER. FOR THIS PURPOSE RELIANCE W AS PLACED ON THE DECISION OF THE MP HIGH COURT IN THE CASE OF CH OUDHARY BUILDERS PRIVATE LIMITED 209 CTR 133 WHEREIN IT W AS HELD THAT COMMISSION ISSUED TO THE DVO U/S 131(1)(D) TO ASCERTAIN THE COST OF CONSTRUCTION WAS INVALID WHERE NO ASSES SMENT PROCEEDINGS WERE PENDING ON THE DATE OF ISSUE OF CO MMISSION. FURTHER RELIANCE WAS PLACED ON THE DECISION OF THE MP HIGH COURT IN THE CASE OF NEVENDRAM AHUJA 290 ITR 453 WHEREIN IT WAS HELD THAT COMMISSION U/S 131(1)(D) COULD BE ISSUED BY THE ASSESSING OFFICER ONLY DURING THE PENDENCY OF T HE ASSESSMENT PROCEEDINGS. REFERENCE BY THE ASSESSING OFFICER TO THE DVO BEING PRIOR TO INITIATION OF ASSESSMENT PRO CEEDINGS -: 55: - 55 WAS NOT VALID AND CONSEQUENTLY THE VALUATION REPORT OF THE DVO CANNOT BE MADE USE FOR MAKING ADDITION U/S 69 O F THE ACT WITH REGARD TO INVESTMENT IN CONSTRUCTION OF BU ILDING. FURTHER RELIANCE WAS PLACED BY THE LEARNED COUNSEL FOR THE ASSESSEE ON THE DECISION OF THE INDORE BENCH IN THE CASE OF PADAMSINGH 10 ITJ 407 WHEREIN IT WAS HELD THAT SIN CE NO PROCEEDINGS WERE PENDING BEFORE THE ASSESSING OFFIC ER FOR THE ASSESSMENT YEAR UNDER CONSIDERATION REFERENCE TO T HE DVO TO ASCERTAIN THE COST OF CONSTRUCTION ITSELF WAS INVAL ID AND BAD IN LAW. FURTHER RELIANCE OF THE LEARNED COUNSEL FOR T HE ASSESSEE WAS ON THE DECISION OF THE ITAT DELHI BENCH IN THE CASE OF SUBHASHCHANDRA CHOPRA WHEREIN IT WAS HELD THAT THE RE IS NO DENIAL THAT SECTION 142A IS INTRODUCED RETROSPECTIV ELY BY WHICH REFERENCE COULD BE MADE BY THE ASSESSING OFFICER TO THE DVO BUT SUCH REFERENCE COULD ONLY BE MADE DURING THE PE NDENCY OF THE PROCEEDINGS. RELIANCE WAS ALSO PLACED ON THE DE CISION OF THE ITAT JABALPUR BENCH IN THE CASE OF RAM VISHAL AGRAWAL HUF; 9 ITJ 132 WHEREIN IT WAS HELD THAT IN THE ABSE NCE OF PENDING OF ASSESSMENT/REASSESSMENT PROCEEDINGS REF ERENCE TO THE DVO IS NOT PERMISSIBLE U/S 142A. FURTHER RE LIANCE WAS -: 56: - 56 PLACED ON THE DECISION OF THE MP HIGH COURT IN THE CASE OF CIT V. NEELAM SHUKLA (MAIT NO. 18/2004) WHEREIN IT WAS HELD THAT WHERE NO PROCEEDINGS IN REGARD TO ASSESSMENT YEAR W AS PENDING ON THE DATE OF REFERENCE TO THE DVO U/S 131 (1)(D) THE REFERENCE WAS INVALID AND THEREFORE THE ASSESSING OFFICER COULD NOT HAVE RELIED ON THE VALUATION REPORT GIVEN BY THE DVO IN PURSUANCE TO SUCH INVALID REFERENCE. 37. IN VIEW OF THE ABOVE CONTENTION OF THE LEARNED CO UNSEL FOR THE ASSESSEE WAS THAT ON THE BASIS OF INVALID R EFERENCE AND CONSEQUENT INVALID VALUATION REPORT THE ADDITION U /S 69 IN RESPECT OF UNEXPLAINED INVESTMENT IN THE CONSTRUCTI ON OF BUILDING IS NOT PERMISSIBLE UNDER LAW HENCE SUCH ADDITION MADE IN THE ASSESSMENT YEAR 2000-01 2001-02 AND 20 02-03 DESERVES TO BE DELETED. 38. ON THE OTHER HAND LEARNED CIT DR CONTENDED THAT AFTER INSERTION OF SECTION 142A THE ASSESSING OFFI CER IS SUFFICIENTLY EMPOWERED TO MAKE A REFERENCE TO THE D VO FOR ESTIMATING THE CORRECT COST OF CONSTRUCTION WITH RE FERENCE TO THE QUALITY OF MATERIAL USED IN THE CONSTRUCTION. FURTHER CONTENTION OF LEARNED CIT DR WAS THAT ON THE BASIS OF DVOS -: 57: - 57 REPORT THE ASSESSING OFFICER HAS CALLED FOR ANY OB JECTION OF THE ASSESSEE AND ONLY AFTER DUE CONSIDERATION OF THESE OBJECTIONS THE ADDITIONS WERE MADE IN RESPECT OF COST OF CONST RUCTION INCURRED BY THE ASSESSEE. 39. WE HAVE CONSIDERED THE RIVAL CONTENTIONS CAREFULL Y GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AN D ALSO DELIBERATED UPON THE CASE LAWS CITED BY THE LEARNED COUNSEL FOR THE ASSESSEE AND LEARNED CIT DR DURING THE COURSE OF HEARING BEFORE US WITH REFERENCE TO VALIDITY OF REFERENCE M ADE BY THE ASSESSING OFFICER U/S 142A WHEN NO ASSESSMENT PROCE EDINGS ARE PENDING BEFORE THE ASSESSING OFFICER. AS PER TH E DATE-WISE CHART GIVEN HEREINABOVE WE FIND THAT THE ASSESSEE HAS FILED RETURN OF INCOME ON 30 TH MARCH 2002 FOR THE ASSESSMENT YEAR 2000-01 AND 2001-02 AND ON 9.8.2002 FOR THE ASSESS MENT YEAR 2002-03. AS PER DEPARTMENT THESE RETURNS WERE PROCESSED U/S 143(1). THEREAFTER REFERENCE WAS MA DE BY THE ASSESSING OFFICER TO THE DVO U/S 142A ON 2.1.2006. THE REPORT OF THE DVO WAS OBTAINED ON 9 TH MARCH 2006. THEREAFTER THE ASSESSING OFFICER ISSUED NOTICE U/S 148 FOR ALL THE ASSESSMENT YEARS UNDER CONSIDERATION ON 28 TH MARCH -: 58: - 58 2006. IT IS QUITE CLEAR FROM THE RESPECTIVE DATES MENTIONED HEREINABOVE THAT THE REFERENCE WAS MADE ON THE DATE WHEN NO PROCEEDINGS WERE PENDING BEFORE THE ASSESSING OFFIC ER. HERE FIRST REFERENCE WAS MADE ON 2.1.2006 TO THE DVO FOR ESTIMATING COST OF CONSTRUCTION AND THEREAFTER WHEN HIS REPORT WAS RECEIVED THE ASSESSMENT WAS REOPENED BY ISSUE OF NOTICE U/S 148 OF THE ACT ON 28.3.2006. THE RETURNS FOR AL L THESE YEARS WERE FILED IN THE YEAR 2002 WHICH WERE DULY PROCESSED U/S 143(1) OF THE ACT. THE TIME LIMIT FOR ISSUE OF NOTICE U/S 143(2) HAD ALSO BEEN EXPIRED. FURTHERMORE THE LAS T DATE OF LIMITATION IN RESPECT OF ALL THE YEARS FOR COMPLE TION OF ASSESSMENT U/S 143(3) AVAILABLE TO THE ASSESSING OF FICER HAD ALSO BEEN EXPIRED ON 31.3.2003 31.3.2004 AND 31.3. 2005 WHEN THE REFERENCE WAS MADE TO THE DVO U/S 142A ON 2.1.2006. NOW APPLYING THE PROPOSITION OF LAW LAID DOWN BY THE MP HIGH COURT IN THE CASE OF CHOUDHARY BUILDER S PRIVATE LIMITED (SUPRA) WHEREIN IT WAS HELD THAT COMMISSION ISSUED TO THE DVO U/S 131(1)(D) TO ASCERTAIN THE COST OF CONS TRUCTION WAS INVALID WHERE NO ASSESSMENT PROCEEDINGS WERE PE NDING ON THE DATE OF ISSUE OF COMMISSION. SIMILAR PROPOSITI ON WAS LAID -: 59: - 59 DOWN BY THE HONBLE M.P. HIGH COURT IN THE CASE OF NEVENDRAM AHUJA (SUPRA) AND IT WAS HELD THAT THE AS SESSING OFFICER CAN ISSUE COMMISSION ONLY IF PROCEEDINGS AR E PENDING BEFORE HIM. A REFERENCE TO THE DVO WAS MADE BY ISS UE OF A COMMISSION U/S 131(1)(D) WHEN NO PROCEEDINGS RELATI NG TO ASSESSMENT YEAR WERE PENDING. THE ISSUE OF SUCH CO MMISSION BY THE ASSESSING OFFICER WAS HELD BY THE HONBLE JURISIDICTIONAL HIGH COURT TO BE INVALID AND CONSEQ UENT VALUATION REPORT OF THE DVO WAS HELD TO BE OF NO US E FOR MAKING ANY ADDITION U/S 69 IN RESPECT OF UNEXPLAINE D INVESTMENT IN THE CONSTRUCTION OF THE BUILDING. 40. HONBLE PATNA HIGH COURT IN THE CASE OF RENA SEN; 235 UTR 219 HELD THAT THE WORDS NOT-WITH-STANDING THAT NO PROCEEDINGS WITH RESPECT TO SUCH PERSON OR CLASS OF PERSONS ARE PENDING OCCURRING IN SUB-SECTION (1A) OF SECTI ON 131 LEAVE NO ROOM FOR DOUBT THAT WHILE THE AUTHORITIES SPECIF IED U/S 131(1A) ARE EMPOWERED TO TAKE ACTION IF THERE IS R EASON TO SUSPECT THAT ANY INCOME HAS BEEN CONCEALED OR IS L IKELY TO BE CONCEALED BY ANY PERSON OR CLASS OF PERSONS EVEN TH OUGH NO PROCEEDINGS WITH RESPECT TO SUCH PERSON OR CLASS OF PERSONS IS -: 60: - 60 PENDING BEFORE HIM OR ANY OTHER IT AUTHORITIES THE AUTHORITY SPECIFIED IN SECTION 131(1) CAN DO SO ONLY IF PROCE EDING IS PENDING BEFORE THEM. IT WAS HELD THAT CONTENTION O F THE DEPARTMENT THAT THE SERVICE OF IMPUGNED NOTICE WOUL D BE DEEMED TO BE INITIATION OF PROCEEDINGS IS COMPLETEL Y MISCONCEIVED. IT WAS HELD THAT NOTICE U/S 131(1)(D ) CAN BE ISSUED ONLY IF A PROCEEDING IS ALREADY PENDING NO NOTICE U/S 131(1)(D) COULD BE ISSUED IN CONNECTION WITH ASCERT AINMENT OF COST OF CONSTRUCTION OF A HOUSE BY ASSISTANT VALUAT ION OFFICER WHEN NO PROCEEDINGS WERE PENDING EXCEPT A NOTICE U/ S 143(2) WHICH WAS RELATED TO A YEAR LATER ON THE PERIOD OF CONSTRUCTION. 41. AS PER OUR CONSIDERED VIEW SECTION 131(1) PROVIDE S THAT THE ASSESSING OFFICER SHALL HAVE THE SAME POWE RS AS ARE VESTED IN A COURT UNDER CPC 1908 WHEN TRYING A SUI T IN RESPECT OF THE MATTERS ENUMERATED INCLUDING ISSUE O F COMMISSION. WHAT IS SIGNIFICANT IS USE OF THE WORD S WHEN TRYING A SUIT. A COURT CAN ISSUE A COMMISSION ONL Y DURING THE PENDENCY OF THE SUIT. AS THE POWERS VESTED IN THE ASSESSING OFFICER ARE THE SAME POWERS AS ARE VESTED IN A COUR T IT FOLLOWS THAT THE ASSESSING OFFICER CAN ISSUE A COMMISSION O NLY IF THE -: 61: - 61 PROCEEDING IS PENDING BEFORE HIM. UNDISPUTEDLY IN THE INSTANT ASSESSMENT YEAR UNDER CONSIDERATION REFERENCE WAS M ADE BY THE ASSESSING OFFICER U/S 142A ON 2.1.2006 ON WHICH DATE NO PROCEEDINGS WERE PENDING BEFORE THE ASSESSING OFFIC ER WITH REFERENCE TO THESE ASSESSMENT YEARS. AS NO PROCEED INGS IN REGARD TO THESE ASSESSMENT YEARS WERE PENDING BEFOR E HIM THE ASSESSING OFFICER COULD NOT HAVE ISSUED THE COMMISS ION U/S 131(1)(D) AND CONSEQUENTLY THE VALUATION REPORT OF THE DVO RECEIVED IN PURSUANCE OF INVALID COMMISSION CANNOT BE MADE USE OF. SIMILAR VIEW HAS BEEN TAKEN BY THE BOMBAY HIGH COURT IN THE CASE OF JAMNADAS MADHAVJI & COMPANY; 162 ITR 331 WHEREIN IT WAS HELD THAT THE POWERS REGARDING D ISCOVERY AND PRODUCTION OF EVIDENCE GIVEN TO THE IT AUTHORIT Y U/S 131 ARE THE SAME POWERS AS VESTED IN A COURT UNDER CPC WHILE TRYING A SUIT. THE EXISTENCE OF A SUIT OR A PROCEE DING IS A SINE QUA NON FOR EXERCISE OF SUCH POWERS UNDER CPC THER EFORE POWER MENTIONED IN SECTION 131(1) CAN BE EXERCISED ONLY IF THE PROCEEDING IS PENDING BEFORE THE CONCERNED OFFICER AND NOT OTHERWISE. IT WAS ALSO OBSERVED THAT THIS INTERPRE TATION IS CONSISTENT WITH THE SCHEME OF SUB-SECTION (1A) OF S ECTION 131 -: 62: - 62 ACCORDING TO WHICH IT IS COMPETENT FOR ASSISTANT DI RECTOR OF INSPECTION TO EXERCISE POWERS U/S 131(1A) UNDER CER TAIN CIRCUMSTANCES EVEN IN ABSENCE OF ANY PENDING PROCEE DINGS. PARI MATERIA THEREFORE POWER IN RESPECT OF MATTER S MENTIONED IN SUB-SECTION (1) OF SECTION 131 VIZ. (A) DISCOVER Y AND INSPECTION (B) ENFORCING THE ATTENDANCE OF ANY PERS ON AND EXAMINING HIM ON OATH () COMPELLING THE PRODUCTION OF BOOKS OF ACCOUNTS AND OTHER DOCUMENTS AND (D) ISSUING COM MISSION. THESE CAN BE EXERCISED ONLY IF PROCEEDING IS PENDIN G BEFORE THE CONCERNED OFFICER AND NOT OTHERWISE. 42. IN 1975 THE TAXATION LAWS (AMENDMENT) ACT 1975 INTRODUCED SUB-S. (1A) IN S. 131. UNDER THIS SUB-SE CTION IF THE ASSISTANT DIRECTOR OF INSPECTION HAS REASON TO SUSP ECT THAT ANY INCOME HAS BEEN CONCEALED OR IS LIKELY TO BE C ONCEALED BY ANY PERSON OF CLASS OR PERSONS WITHIN HIS JURISDIC TION THEN FOR ANY INQUIRY OR INVESTIGATION RELATING THERETO IT S HALL BE COMPETENT FOR HIM TO EXERCISE POWERS CONFERRED UNDE R SUB-S. (1) OF S. 131 NOTWITHSTANDING THAT NO PROCEEDINGS WITH RESPECT TO SUCH PERSON OR CLASS OF PERSONS ARE PENDING BEFO RE HIM OR ANY OTHER IT AUTHORITY. ABSENCE OF THIS NON OBSTINA TE CLAUSE IN -: 63: - 63 S. 131(1) IS SIGNIFICANT. READING S. 131(1) AND S. 131(1A) TOGETHER IT IS OBVIOUS THAT WHEREAS AN OFFICER MEN TIONED IN SUB-S. (1) CAN EXERCISE POWERS THEREUNDER ONLY IF A PROCEEDING IS PENDING BEFORE HIM THE OFFICER MENTIONED IN SUB -S. (1A) VIZ. THE ASSISTANT DIRECTOR OF INSPECTION CAN EXERCISE S UCH POWERS NOTWITHSTANDING THAT NO PROCEEDINGS ARE PENDING BEF ORE HIM OR BEFORE ANY OTHER OFFICER. DISTINCTION HAS THUS B EEN CLEARLY MAINTAINED BETWEEN THE CONDITIONS NECESSARY FOR THE EXERCISE OF POWERS BY THESE TWO CATEGORIES OF OFFICERS VIZ. THOSE IN SUB- S. (1) AND THE ONE IS SUB-S. (1A) OF S. 131. THUS E XISTENCE OF A PENDING PROCEEDING IS CONDITION PRECEDENT FOR THE E XERCISE OF POWERS UNDER S. 131(1); THERE IS NO SUCH CONDITION PRECEDENT UNDER S. 131(1A). AGAIN UNDER SUB-S. (3) OF S. 131 ANY AUTHORITY REFEREED TO IN SUB-S. (1) OR SUB-S. (1A) OF S. 131 MAY IMPOUND AND RETAIN IN ITS CUSTODY ANY BOOKS OF ACCO UNTS OR OTHER DOCUMENTS PRODUCED BEFORE IT IN ANY PROCEEDIN G UNDER THIS ACT. FURTHER STILL EXPLANATION (2) TO S. 132 ALSO INDICATES THAT BUT FOR ITS ARTIFICIAL AND EXTENDED DEFINITION OF THE WORD PROCEEDING PROCEEDING WOULD MEAN ONE ACTUALLY PE NDING AND NOT ONE COMPLETED AND CONCLUDED. ALSO RELEVANT TO T HE CONTEXT -: 64: - 64 IS THE FORM OF THE SUMMONS [UNDER S. 131(1)] WHICH COMMENCES WITH THE WORDS WHEREAS YOUR ATTENDANCE I S REQUIRED IN CONNECTION WITH THE PROCEEDINGS UNDER T HE IT ACT IN YOUR CASE. FRAMED AND PRESCRIBED AT AND SINCE A BOUT THE TIME S. 131(1) WAS ENACTED THIS FORM CONSTITUTES IN A SENSE A CONTEMPORANEOUS EXPOSITION AIDING AND ASSISTING A C ORRECT INTERPRETATION OF S. 131(1). THE FORM ALSO ASSUMES AND PRESUPPOSES THE EXISTENCE OF A PENDING PROCEEDING B EFORE THE CONCERNED OFFICER. 43. SECTION 142 EMPOWERS THE AO TO REQUIRE THE VALUATI ON OFFICER FOR MAKING THE ESTIMATE OF THE VALUE OF ANY ASSETS PROVIDED THE AO REQUIRED THE SAME FOR THE PURPOSE O F MAKING THE ASSESSMENT OR RE-ASSESSMENT. HOWEVER THE PROVI SIONS OF SECTION 142A DOES NOT EMPOWER THE AO TO REFER THE M ATTER TO THE DVO FOR GATHERING INFORMATION WHEN NO ASSESSMEN T PROCEEDINGS IS PENDING BEFORE HIM. MAKING THE REASS ESSMENT AND REOPENING OF ASSESSMENT ARE TWO DIFFERENT THING S. WHEN THE PROCESS OF REOPENING OF ASSESSMENT ENDS AND THE ASSESSMENT IS VALIDLY REOPENED THEREAFTER THE PRO CESS OF MAKING REASSESSMENT STARTS. NAGPUR BENCH OF I.T.A.T . IN THE -: 65: - 65 CASE OF DR. ARJUN D. BHARAD VS. ITO 78 TTJ 832 HE LD THAT PENDENCY OF PROCEEDINGS IS SINE QUE NON FOR GIVING JURISDICTION TO THE CONCERNED AUTHORITIES TO MAKE A REFERENCE TO THE DVO AND THE AO CAN EXERCISE THE POWER CONFERRED ON HIM U/S 131(1)(D) ONLY IF AN INDEPENDENT PROCEEDINGS IS PEN DING WITH HIM. ADMITTEDLY IN THE INSTANT CASE BEFORE US WHE N THE AO MADE A REFERENCE TO THE DVO NO PROCEEDINGS WERE PE NDING BEFORE HIM AND THEREFORE HE WAS NOT COMPETENT TO REFER THE MATTER TO THE DVO. THE LANGUAGE OF SECTION 142A(1) CLEARLY STIPULATES THAT FOR THE PURPOSE OF MAKING AN ASSESS MENT OR REASSESSMENT UNDER THIS ACT WHERE AN ESTIMATE OF T HE VALUE OF ANY INVESTMENT REFERRED TO IN SECTION 69 OR SECTION 69B OR THE VALUE OF ANY BULLION JEWELLERY OR OTHER VALUABLE A RTICLES REFERRED TO IN SECTION 69A OR SECTION 69B IS REQUI RED TO BE MADE THE AO MAY REQUIRE THE VALUATION OFFICER TO M AKE AN ESTIMATE OF SUCH VALUE AND REPORT THE SAME TO HIM. 44. FROM THE ABOVE IT IS EVIDENT THAT SECTION 142A EMPOWERS THE AO TO REQUIRE THE VALUATION OFFICER FO R MAKING THE ESTIMATE OF THE VALUE OF ANY ASSET PROVIDED THE AO REQUIRED THE SAME FOR THE PURPOSE OF MAKING THE ASSESSMENT O R -: 66: - 66 REASSESSMENT. HOWEVER THE ABOVE PROVISION DOES NOT EMPOWER THE AO TO REFER THE MATTER TO THE DVO FOR GATHERING INFORMATION WHEN NO ASSESSMENT PROCEEDING IS PENDI NG BEFORE HIM. IN THE CASE OF CHOUDHARY BUILDERS PRIVATE LIMI TED (SUPRA) HON'BLE JURISDICTIONAL HIGH COURT HELD THA T SINCE THE DEPARTMENT HAS FAILED TO SHOW THAT ANY ASSESSMENT PROCEEDINGS WAS PENDING BEFORE THE AO ON 22 ND MAY 2001 WHEN THE DY. CIT ISSUED COMMISSION U/S 131(1)(D) TO THE DVO TO ASCERTAIN THE COST OF CONSTRUCTION THE REFERENC E SO MADE WAS INVALID SINCE NO ASSESSMENT PROCEEDINGS WERE P ENDING ON THE DATE OF ISSUE OF COMMISSION. 45. I.T.A.T. INDORE BENCH IN THE CASE OF PADAM SINGH (SUPRA) HELD THAT REFERENCE TO THE VALUATION OFFICE R U/S 142A READ WITH SECTION 131(1)(D) OF THE INCOME-TAX ACT 1961 WAS NOT VALID IN VIEW OF THE FACT THAT NO PROCEEDINGS W ERE PENDING BEFORE THE AO WHEN THE REFERENCE WAS MADE TO THE DV O. 46. DURING THE COURSE OF HEARING THE LEARNED COUNSEL FOR THE ASSESSEE ALSO PLACED ON RECORD AND HIGHLIGHTED OUR ATTENTION TO THE DECISION OF MP HIGH COURT IN THE CASE OF SMT. NEELAM SHUKLA (MAIT 18/2004) ORDER DATED 5.8.2005 WHICH -: 67: - 67 WAS SUBSEQUENT TO INTRODUCTION OF SECTION 142A BY T HE FINANCE (NO. 2) ACT 2004. IT WAS THE CONTENTION OF THE LEARNED AR THAT EVEN AFTER INSERTION OF SECTION 142A WHICH WAS MADE EFFECTIVE RETROSPECTIVELY FROM 15.11.1972 THE JURI SDICTIONAL HIGH COURT HAS HELD THAT NO REFERENCE CAN BE MADE U NLESS AN ASSESSMENT PROCEEDING IS PENDING BEFORE THE ASSESSI NG OFFICER. THE RELEVANT QUESTION OF LAW REFERRED BEFORE THE HO NBLE HIGH COURT WAS AS UNDER :- WHETHER THE TRIBUNAL COMMITTED ERROR OF LAW AND FA CTS IN HOLDING THAT REFERENCE TO THE VALUATION OFFICER WAS NOT IN ACCORDANCE WITH LAW? 47. WE HAVE GONE THROUGH THE ABOVE ORDER OF THE JURISDICTIONAL HIGH COURT WHEREIN BEFORE REACHING T O THE CONCLUSION THE COURT HAS SPECIFIED AT PARA 11 THE R ELEVANT DATES FOR ISSUE OF SUMMONS NOTICE U/S 142(1) ETC. WHICH READS AS UNDER :- THE FOLLOWING DATES ARE RELEVANT: OCTOBER TO SEARCH & SEIZURE OPERATIONS. NOVEMBER 1992 -: 68: - 68 26.2.1993 ORDER BY ACIT INV CIRCLE BHOPAL U/S 132(5). 21.5.2003 REFERENCE BY AICT (INVESTIGATION) TO DVO FOR VALUATION U/S 132(5). 8.10.1993 VALUATION REPORT OF DVO. 7.12.1993 NOTICE U/S 142(1). 16.12.1993 SERVICE OF NOTICE U/S 142(1). 2.5.1994 RETURN FILED BY THE ASSESSEE. 7.3.1996 ASSESSMENT ORDER PASSED. 48. AFTER REFERRING TO THE ABOVE DATES THE COURT REAC HED THE FOLLOWING CONCLUSION :- THE REVENUE DOES NOT DISPUTE THAT THE COMMISSION T O DVO U/S 131(1)(D) TO VALUE THE PREMISES WAS ISSUED ON 21.5.2003. ADMITTEDLY NO ASSESSMENT PROCEEDINGS WE RE PENDING ON 21.5.1993. THE QUESTION IN REGARD TO VAL IDITY OF A REFERENCE U/S 131(1)(D) MADE WHEN NO ASSESSM ENT PROCEEDINGS WERE PENDING WAS CONSIDERED BY US IN COMMISSIONER OF INCOME TAX VS. NEVENDRAM AHUJA (ITA NO.100/1999 DECIDED ON 1.2.2005) WHERE FOLLOWING THE DECISION OF THE BOMBAY HIGH COURT IN JAMNADAS MADHAVJI & CO. VS. J.B. PANCHAL ITO 162 -: 69: - 69 (1986) ITR 331 AND THE DECISION IN RINA SEN VS. CIT (ITA 219) WE HELD THAT WHERE NO PROCEEDING IN REGARD TO THE ASSESSMENT YEAR WAS PENDING ON THE DATE OF REFERENC E DVO U/S 131(1)(D) THE REFERENCE WAS INVALID. FOLLO WING THE SAID DECISION WE HOLD THAT THE REFERENCE MADE ON 21.5.1993 WAS INVALID AND THEREFORE THE AO COULD NOT HAVE RELIED UPON THE VALUATION REPORT GIVEN BY DVO IN PURSUANCE OF SUCH INVALID REFERENCE. ACCORDINGLY T HE THIRD QUESTION IS ANSWERED IN THE NEGATIVE AGAINST THE REVENUE. 49. IT IS CLEAR FROM THE ABOVE DECISION THAT NO VALID REFERENCE CAN BE MADE TO THE DVO UNLESS PROCEEDINGS IS PENDING BEFORE THE AO. BOTH THE LOWER AUTHORITIES H AVE NOT DEALT WITH THE ISSUE OF VALIDITY OF MAKING REFERENC E AND THE FACTS ARE ALSO NOT CLEAR FROM THE RECORD IN THE IN TEREST OF JUSTICE AND FAIR PLAY WE RESTORE THIS GROUND BACK TO THE FILE OF AO FOR DECIDING AFRESH IN THE LIGHT OF RELEVANT FAC TS AND APPLYING THE PROPOSITION OF LAW LAID DOWN BY VARIOU S HIGH -: 70: - 70 COURTS INCLUDING JURISDICTIONAL HIGH COURT AND VARI OUS BENCHES OF TRIBUNAL AS DISCUSSED HEREINABOVE. ACCOR DINGLY THIS GROUND OF THE ASSESSEE IN ALL THE YEARS ARE AL LOWED FOR STATISTICAL PURPOSES. 50. THE ASSESSEE HAS ALSO RAISED HIS CONTENTION WITH R EGARD TO MERIT OF THE ADDITION MADE WITH REFERENCE TO THE VALUATION REPORT WHICH WE THINK IT APPROPRIATE TO DEAL WITH W ITHOUT PREJUDICE TO OUR DECISION ON THE LEGAL ISSUE OF REF ERENCE TO DVO AS DISCUSSED ABOVE. FROM RECORD WE FOUND THAT THE ASSESSING OFFICER HAS MADE THE ADDITION FOR THE ALLEGED INVES TMENT IN BUILDING IN THE ASSESSMENT YEARS 2000-01 TO 2002-03 AS UNDER :- AY AMOUNT 2000-01 3700000 2001-02 5000000 2002-03 5898337 1 45 98 337 -: 71: - 71 51. FROM THE ORDER OF THE ASSESSING OFFICER WE FIND TH AT THE MATTER RELATES TO BUILDING SITUATED AT PLOT NO. 189 MP NAGAR ZONE-I BHOPAL. AS PER THE MATERIAL AND EVIDENCE P LACED ON RECORD THE PLOT WAS PURCHASED BY SMT. BHAGWATI SON I WIFE OF LATE BABULAL SONI(THE ASSESSEE) FROM BHOPAL DEVELOP MENT AUTHORITY IN THE YEAR 1977. THIS PLOT WAS ALLOTTED UNDER THE FREEDOM FIGHTERS QUOTA BECAUSE LATE BABULAL SONI WA S A FREEDOM FIGHTER. SMT. BHAGWATI SONI DIED ON 7.8.20 01 AND THE ASSESSEE BABULAL SONI ALSO DIED ON 27.6.2005. THE SON OF DECEASED ASSESSEE PRADEEP SONI HAD SUBMITTED THAT T HE CONSTRUCTION OF BUILDING WAS DONE BY THE PARENTS DU RING THEIR LIFE TIME AND IN THE SAME BUILDING THE ASSESSEE LAT E BABULAL SONI WAS ALSO CARRYING ON RETAIL BUSINESS OF SWEET S AND NEMKEEN. WE ALSO FIND THAT PERMISSION FOR CONSTRUCT ION OF BUILDING FROM MUNICIPAL CORPORATION BHOPAL WAS OB TAINED ON 2.2.1977 BY SMT. BHAGWATI SONI. SHE HAD CONSTRUCTED BASEMENT GROUND FLOOR AND MEZZANINE FLOOR. THE RE LEVANT CONSTRUCTION PERIOD AS PER RECORD WAS FROM FEBRUARY 1977 TO 31.3.1999. IT IS EVIDENT FROM THE APPROVED MUNICIP AL PLAN DATED 21.4.1999 AS PLACED ON RECORD. THIS APPROVED PLAN IS IN -: 72: - 72 RELATION TO FIRST AND SECOND FLOORS. THERE IS ALSO A MENTION IN THE PLAN REGARDING THE EXISTING CONSTRUCTED FLOORS I.E. BASEMENT GROUND FLOOR AND MEZZANINE FLOOR. THUS T HE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT O F INVESTMENT IN CONSTRUCTION COST OF BASEMENT GROUND FLOOR AND MEZZANINE FLOOR WHICH WERE CONSTRUCTED BY SMT. BHAG WATI SONI WAS NOT JUSTIFIED IN THE HANDS OF THE PRESENT ASSESSEE. THE DOCUMENTARY EVIDENCE PLACED ON RECORD IN THE FO RM OF PERMISSION FOR CONSTRUCTION OF BUILDING PLAN AND AP PROVED BUILDING PLAN DATED 24.1.1999 CLEARLY ESTABLISHES T HE CONSTRUCTION BY SMT. BHAGWATI SONI. THE DEPARTMENT HAS NOT BROUGHT ANY CONTRARY MATERIAL ON RECORD TO SUGGEST THAT DURING THE PERIOD FEBRUARY 1977 TO 31 ST MARCH 1999 THE CONSTRUCTION WAS DONE BY ANY OF THE PRESENT ASSESSE E. THUS WE FOUND THAT THE ASSESSEE HAS DISCHARGED ITS BURDE N BY PLACING ON RECORD EVIDENCE OF GOVERNMENT AUTHORITY WHICH THE DEPARTMENT HAS NOT BEEN ABLE TO DISLODGE BY PUTTING ANY OTHER EVIDENCE TO SUGGEST THAT CONSTRUCTION WAS CARRIED O N BY THE PRESENT ASSESSEE. WE ALSO FIND THAT THE ASSESSEE H AS PLACED BEFORE THE LOWER AUTHORITIES COPY OF MUNICIPAL CORP ORATION -: 73: - 73 NOTICE DATED 30.1.1987 AND 23.2.1987 WHICH CLEARLY INDICATE THAT THERE WAS CONSTRUCTION IN THOSE YEARS AND FOR THE EXCESS CONSTRUCTION THE MUNICIPAL CORPORATION HAD ISSUED N OTICES TO SMT. BHAGWATI SONI AND SHE HAD PAID CHARGES FOR THE EXCESS CONSTRUCTION UNDERTAKEN BY HER. WE ACCORDINGLY DIRE CT THE AO TO DELETE THE ADDITION MADE ON ACCOUNT OF COST OF C ONSTRUCTION ATTRIBUTABLE TO BASEMENT GROUND FLOOR AND MEZZANIN E FLOOR. 52. FROM RECORD WE FIND THAT SECOND PHASE OF CONSTRUCT ION I.E. ON FIRST AND SECOND FLOORS AS PER THE APPROVED BUILDING PLAN DATED 21 ST APRIL 1999 WAS DONE BETWEEN THE PERIOD APRIL 1999 TO JANUARY 2001 WHICH IS EVIDENT FROM ANOTHER MUNICIPAL APPROVED PLAN DATED 17.1.2001. IT WAS PL ACED BEFORE THE LOWER AUTHORITIES AND ALSO FIND PLACE IN THE PAPER BOOK FILED BEFORE US. WE FIND THAT IN THIS PLAN DA TED 17.1.2001 THE CONSTRUCTION PORTION HAS BEEN SHOWN AS FIRST FL OOR SECOND FLOOR AND SOME CONSTRUCTION ON MUMTY ETC. ON TERRA CE FLOOR. DURING THIS PERIOD THE ALLEGATION OF THE MUNICIPAL CORPORATION WAS THAT SOME OF THE CONSTRUCTIONS UNDERTAKEN BY SM T. BHAGWATI SONI WAS NOT IN ACCORDANCE WITH THE APPROV ED PLAN THEREFORE THE MUNICIPAL AUTHORITIES HAD COMPOUNDED THE SAID -: 74: - 74 UNAUTHORIZED CONSTRUCTION AND HAVE ALSO MENTIONED T HIS FACT IN THE SAID PLAN AS PLACED ON RECORD. WE ALSO FIND THAT THE COMPOUNDING CHARGES WERE ALSO LEVIED ON SMT. BHAGWA TI SONI FOR SUCH UNAUTHORIZED CONSTRUCTION AMOUNTING TO RS. 56 549/- .THE DEMAND WAS RAISED THROUGH NOTICE DATED 16.1.20 01 AND THE SAID COMPOUNDING FEE WAS PAID BY SMT. BHAGWATI SONI ON 17.1.2001. THE RELEVANT RECEIPT NO. 57 OF MUNICIPA L CORPORATION BHOPAL IN THE NAME OF SMT. BHAGWATI S ONI IS ALSO PLACED ON RECORD. FROM THE PLAN WE ALSO FIND THAT ABOVE THE TERRACE FLOOR THERE WAS ALSO A CONSTRUCTION OF LIFT ROOM/MACHINE ROOM THUS THE PERIOD OF SECOND PHASE OF CONSTRUCTION BETWEEN APRIL 1999 TO 2001 WAS FULLY SUPPORTED BY DOCUMENTARY EVIDENCE PLACED BEFORE THE LOWER AUT HORITIES AND ALSO IN THE PAPER BOOK FILED BEFORE US. THE DE PARTMENT HAS NOT DISPUTED THESE DOCUMENTS HAVING BEEN FILED BEFORE THE AUTHORITIES BELOW. THE FACTUM OF CONSTRUCTION WAS NOTICED BY THE DEPARTMENT AT THE TIME OF SURVEY AT THE ASSESSE ES PREMISES ON 18.12.2002. AT THE RELEVANT TIME OF SUR VEY THE ASSESSEE BABULAL SONI WAS ALIVE AND THE REFERENCE WAS MADE BY THE ASSESSING OFFICER U/S 142A ON 2.1.2006 FOR V ALUATION OF -: 75: - 75 COST OF CONSTRUCTION OF BUILDING. HOWEVER THE DVO HAS MENTIONED IN HIS REPORT THAT PERIOD OF CONSTRUCTION OF ENTIRE BUILDING IS FROM APRIL 1999 TO MARCH 2003. THERE AFTER THE DVO HAD DISTRIBUTED THIS COST BETWEEN THE PERIOD 20 00-01 TO 2002-03. ONLY AFTER RECEIPT OF THE DVOS REPORT TH AT THE ASSESSING OFFICER HAS ISSUED NOTICE U/S 148 OF THE ACT WHEREIN AS PER THE REASONS MENTIONED THE EXACT AMOUNT OF CONSTRUCTION COST TAKEN BY THE DVO IN DIFFERENT YEA R WAS MENTIONED BY THE ASSESSING OFFICER AS ESCAPEMENT OF INCOME FOR THE RELEVANT ASSESSMENT YEARS UNDER CONSIDERATI ON. HOWEVER THE ASSESSEE HAS ALSO FURNISHED A CERTIFIC ATE IN THE FORM OF VALUATION REPORT OF SHRI RAJESH RAINA A RE GISTERED VALUER APPROVED BY GOVERNMENT ACCORDING TO WHICH B UILDING WAS COMPLETED BY MARCH 2002. IT IS CLEAR FROM THE VARIOUS DOCUMENTS PLACED ON RECORD AS NARRATED BELOW WHICH WAS PLACED BY THE ASSESSEE BEFORE THE LEARNED COMMISSIO NER OF INCOMETAX (APPEALS) ALONG WITH THE APPLICATION UNDE R RULE 46A :- (A) MUNICIPAL CORPORATION BHOPAL NOTICE DATED 30.1.87. -: 76: - 76 (B) MUNICIPAL CORPORATION BHOPAL NOTICE DATED 23.2.87. (C) SANCTIONED OF UNAUTHORIZED CONSTRUCTION APPROVAL DATED 17.1.2001. (D) MUNICIPAL CORPORATION COMPOUNDING FEE RECEIPT NO. 2202/57 DATED 17.1.2001. (E) MUNICIPAL CORPORATION COMPOUNDING FEE DEMAND NOTICE DATED 16.1.2001. THESE DOCUMENTS WERE FORWARDED BY THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS) TO THE ASSESSIN G OFFICER CALLING FOR REMAND REPORT. WE ALSO FIND THAT THE AS SESSING OFFICER HAS ALSO MADE INQUIRIES FROM BHOPAL MUNICIP AL CORPORATION FOR PURPOSE OF SENDING REMAND REPORT. HOWEVER THE CONTENTS OF THE REMAND REPORT AND OUTCOME OF SU CH INQUIRY AND THE COMMENTS OF THE ASSESSING OFFICER W ERE NOT INCORPORATED BY THE LD. CIT(A) IN HIS APPELLATE ORD ER. IT WAS ALSO ALLEGED BY THE LEARNED COUNSEL FOR THE ASSESSE E THAT THE ASSESSEE WAS NEVER SUPPLIED THE COPY OF REMAND REPO RT SO AS TO ENABLE HIM TO SUBMIT HIS REJOINDER. 53. IN THE VALUATION REPORT GIVEN BY THE DVO HE VALUED THE ESTIMATED COST OF CONSTRUCTION INCURRED BY THE ASSE SSEE AND ALSO MENTIONED THE YEAR OF CONSTRUCTION. THE YEAR IN WHICH SUCH CONSTRUCTION TOOK PLACE IS TO BE JUDGED FROM T HE RELEVANT -: 77: - 77 EVIDENCE PRODUCED BY THE ASSESSEE IN THIS REGARD OR THE EVIDENCE GATHERED BY THE DVO OR ASSESSING OFFICER D URING THE ASSESSMENT PROCEEDINGS. THE ESTIMATED COST OF CONS TRUCTION AS ARRIVED AT BY THE DVO IN THE INSTANT CASE WAS BI FURCATED BY HIM IN THREE YEARS WITHOUT ASSIGNING ANY REASON FOR ARRIVING AT CONCLUSION REGARDING YEAR OF CONSTRUCTION. FURTHER NO EVIDENCE WAS REFERRED BY THE DVO OR THE A.O. TO REA CH TO THE CONCLUSION THAT CONSTRUCTION WAS ACTUALLY UNDERTAKE N IN THE YEARS MENTIONED IN THE DVOS REPORT. ON THE OTHER HAND THE EVIDENCE PLACED ON RECORD BY THE ASSESSEE IN THE FO RM OF APPROVED PLAN FROM MUNICIPAL CORPORATION NOTICE OF MUNICIPAL CORPORATION DATED 30.1.1987 23.2.1987 S ANCTION OF UNAUTHORIZED CONSTRUCTION APPROVAL DATED 17.1.20 01 RECEIPT OF FEE PAID FOR COMPOUNDING THE UNAUTHORIZE D CONSTRUCTION TO THE MUNICIPAL CORPORATION DATED 17. 1.2001 CLEARLY ESTABLISH RELEVANT YEARS IN WHICH CONSTRUCT ION WAS UNDERTAKEN AND COMPLETED. WHENEVER MUNICIPAL CORPO RATION FINDS THAT THERE IS ANY CONSTRUCTION IN DEVIATION T O THE APPROVED MAP AND WHICH FALLS IN THE SET BACK AREA THERE IS A PROCEDURE FOR COMPOUNDING THE SAME BY LAYING PENAL FEE. THE -: 78: - 78 DEMAND NOTICE OF MUNICIPAL CORPORATION DATED 16.1.2 001 CLEARLY ESTABLISHES THE FACT THAT CONSTRUCTION HAD ALREADY TAKEN PLACE PRIOR TO 16.1.2001 PART OF WHICH WAS NO T AS PER PARA METERS OF THE APPROVED PLAN. THEREFORE THE MU NICIPAL CORPORATION HAS ASKED FOR PAYMENT OF COMPOUNDING FE E WHICH HAS ACTUALLY BEEN PAID VIDE RECEIPT NO. 220/57 DATE D 17.1.2001. ON THE BASIS OF THESE DOCUMENTARY EVIDE NCE AS PLACED ON RECORD AND WHICH WAS ALSO FURNISHED BEFOR E THE LOWER AUTHORITIES WE CAN SAFELY CONCLUDE THAT BASE MENT GROUND FLOOR AND MEZZANINE FLOOR WHICH HAVE BEEN DE SCRIBED BY THE DVO AS FIRST FLOOR HAD BEEN CONSTRUCTED BET WEEN FEBRUARY 1977 TO MARCH 1999 RELEVANT TO THE ASSES SMENT YEAR 1977-78 TO 1999-00. THUS WE DO NOT FIND ANY JUSTIFICATION IN THE ADDITION MADE BY THE ASSESSING OFFICER IN RESPECT OF THESE CONSTRUCTIONS DURING THE RELEVANT ASSESSMENT YEARS UNDER CONSIDERATION. 54. IT IS ALSO CLEAR FROM THESE DOCUMENTS THAT THE FIR ST FLOOR SECOND FLOOR TERRACE FLOOR AND LIFT ROOM AB OVE THE TERRACE FLOOR WERE COMPLETED BETWEEN APRIL 1999 TO FEBRUAR Y 2001 FALLING WITHIN THE ASSESSMENT YEARS 2000-01 AND 200 1-02. -: 79: - 79 HOWEVER THE DVO HAS DESCRIBED FIRST FLOOR AS SECON D FLOOR SECOND FLOOR AS THIRD FLOOR TERRACE FLOOR AS FOURT H FLOOR AND FLOOR ABOVE THE TERRACE FLOOR I.E. LIFT ROOM AS FOU RTH FLOOR. THUS NO ADDITION WAS WARRANTED EVEN IN RESPECT OF THESE CONSTRUCTIONS IN THE ASSESSMENT YEAR 2002-03 WHICH HAS BEEN WRONGLY DONE BY THE ASSESSING OFFICER. AT THE VERY SAME TIME WE FIND THAT AFTER COMPLETING THE CONSTRUCTIO N WORK OF HALL WHICH IS SITUATED ON THE FIRST AND SECOND FLOO R THE ASSESSEE HAS UNDERTAKEN FURNISHING AND INTERIOR DEC ORATION WORK IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMEN T YEAR 2002-03. THEREFORE ANY ADDITION IN RESPECT OF THE SE INVESTMENTS CAN BE TAKEN INTO ACCOUNT IN THE ASSESS MENT YEAR 2002-03. AS PER THE DETAILS FURNISHED BY THE ASSES SEE ON FOURTH AND FIFTH FLOORS ALONG WITH MUMTIES ON THE T ERRACE FLOOR AND LIFT ROOM ABOVE THE TERRACE FLOOR EXPENDITURE OF RS.7 30 000/- WAS INCURRED. THE AREA COVERED BY TH E HALLS ON THE 4 TH AND 5 TH FLOOR WAS AROUND 5 943 SQ.FT. AS PER THE LEARNED COUNSEL FOR THE ASSESSEE EXPENDITURE ON CON STRUCTION OF SIMPLE HALL ARE MUCH LESS THAN THE EXPENDITURE I NCURRED ON CONSTRUCTION OF A HOUSE OR RESIDENTIAL APARTMENT. FOR THIS -: 80: - 80 PURPOSE RELIANCE WAS PLACED ON THE DECISION OF ITA T INDORE BENCH IN THE CASE OF NAVINCHAND MEHRA; 32 ITC 198 WHEREIN CONSTRUCTION COST @ RS. 237/- PER SQ. FT. WAS ACCEP TED DURING THE PERIOD OF 1996-97 1997-98 AND 2000-01. IN THE CASE OF PURSHOTTAM KHATRI V. ITO; 1 ITJ 474 THE INDORE BENC H HAS HELD THAT CONSTRUCTION COST @ RS. 150/- SHOULD BE A CCEPTED DURING THE PERIOD 1986 TO 1990. AFTER REFERRING TO THESE DECISIONS OF THE COORDINATE BENCH THE LEARNED COUNS EL FOR THE ASSESSEE SUBMITTED THAT THE AREA OF CONSTRUCTION ON 4 TH AND FIFTH FLOORS IS AROUND 5943 SQ.FT. AND THE TOTAL CO ST OF RS. 7 30 000/- WAS INCURRED THEREON THE RATE PER SQ. FT. WORKS OUT TO BE RS. 123/- WHICH IS QUITE REASONABLE KEEPI NG IN VIEW THE RATES ACCEPTED BY THE TRIBUNAL IN THE DECISION CITED HEREINABOVE. WITH RESPECT TO THE RATE OF CONSTRUCT ION AT RS. 123/- PER SQ.FT. WE DIRECT THE ASSESSING OFFICER TO PROPERLY ADJUST THE SAME KEEPING IN VIEW THE COST INFLATION INDEX AS NOTIFIED BY THE CENTRAL GOVERNMENT FOR PURPOSE OF C OMPUTING THE COST OF CONSTRUCTION. 55. THUS WE FOUND THAT CONSTRUCTION OF SECOND THIRD FOURTH AND FIFTH FLOORS WAS UNDERTAKEN DURING THE PERIOD 1999 -: 81: - 81 TO 2002 FALLING IN THE ASSESSMENT YEARS 2000-01 AN D 2001-02. THE ASSESSEE HAS ALSO FURNISHED VALUATION REPORT BY CHARTERED ENGINEER AND REGISTERED VALUER M/S. RAINA & COMPAN Y ACCORDING TO WHICH THE FOLLOWING IS THE AREA OF CON STRUCTION :- 1) SECOND FLOOR 362.35 SQ.MTRS. 2) THIRD FLOOR 362.35 SQ.MTRS. 3) FOURTH FLOOR 92.09 SQ.MTRS. 4) FIFTH FLOOR 63.86 SQ.MTRS. 56. THE CONSTRUCTION COST HAS BEEN WORKED OUT BY THE REGISTERED VALUER AT RS. 2500/- PER SQ.MTR. RS. 26 00/- PER SQ.MTR. RS. 2700/- PER SQ.MTR AND RS. 2800/- PER S Q.MTR. FOR SECOND THIRD FOURTH AND FIFTH FLOOR RESPECTIVELY. THUS THE TOTAL COST OF BUILDING COMES TO RS. 32 78 620/-( SE COND THIRD FOURTH AND FIFTH FLOOR). THE COST OF SERVICES ON TH ESE FLOORS WORK OUT TO BE RS. 6 55 725/-. ITEMS FITTED WITH THE BUI LDING AS PER THE MARKET PRICE WAS ARRIVED AT BY REGISTERED VALUE R AT RS. 16 21 137/-. AS PER ANNEXURE C GIVING FULL DETAI LS OF CERAMIC TILES KOTAH STONE SLAPS GRANITE SLAB ETC. DULY IN CORPORATING THE AREA AND RATE OF MATERIALS. THE COST OF EXTRA I TEMS AS PER -: 82: - 82 ANNEXURE D WORKS OUT AT RS. 2 62 370/-. THUS THE ENTIRE COST OF SECOND THIRD FOURTH AND FIFTH FLOOR INCLU DING COST OF SERVICES ITEMS AS PER MARKET RATE AND THE EXTRA IT EMS PUT THEREIN WORKS OUT TO RS. 58 17 852/-. THE REGISTERE D VALUER HAS ALSO GIVEN DUE REASONING FOR ADOPTING THE PARTI CULAR RATE OF CONSTRUCTION. IT APPEARS THAT THE AO HAS NOT GIVEN ANY REASONS FOR DISREGARDING THE RATE AND THE AREA MEASURED BY THE REGISTERED VALUER. NEITHER THE OBJECTION RAISED BY THE ASSESSEE HAS BEEN CONSIDERED. IN THE INTEREST OF JUSTICE WE RESTORE THE MATTER BACK TO THE FILE OF AO FOR RE-EVALUATING THE COST OF CONSTRUCTION OF SECOND THIRD FOURTH AND FIFTH FLO OR IN TERMS OF OUR ABOVE DISCUSSION. 57. IT WAS ALSO ARGUED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE METHOD OF VALUATION ADOPTED BY TH E DVO WAS NOT ON THE BASIS OF THE STATE PWD CSR RATES APP LICABLE AT BHOPAL. RELIANCE WAS PLACED ON THE DECISION OF THE DELHI BENCH IN THE CASE OF SIKHARCHAND JAIN & SONS; 32 TT J 570 MODERN CONSTRUCTION AND DEVELOPERS; 63 ITD 235 IND ORE BENCH (T M) T.M. THANEVALA; 26 ITD 292; ITO V. TEK CHAND; 52 ITD 197. THUS IT WAS CONTENDED THAT EVEN IN RESPE CT OF -: 83: - 83 CONSTRUCTION UNDERTAKEN DURING THE RELEVANT ASSESSM ENT YEAR THE DVO SHOULD ADOPT STATE PWD CSR RATES APPLICABLE TO BHOPAL. ACCORDINGLY WE DIRECT THE ASSESSING OFFIC ER TO HAVE THE VALUATION OF 4 TH AND 5 TH FLOORS ALONG WITH MUMTIES ON THE TERRACE FLOOR AND THE ROOM ABOVE THE TERRACE FLOOR IN TERMS OF OUR DIRECTIONS GIVEN HEREINABOVE. FURTHER THE CON TRIBUTION MADE BY OTHER FAMILY MEMBERS TOWARDS CONSTRUCTION O F HOUSE SHOULD BE GIVEN DUE CARE WHILE CONSIDERING THE ADDI TION IN RESPECT OF THE CONSTRUCTION OF THESE FLOORS. THE AS SESSING OFFICER IS ALSO DIRECTED TO ADOPT THE STATE PWD CSR RATES APPLICABLE AT BHOPAL. WE DIRECT ACCORDINGLY. 58. NEXT GRIEVANCE OF THE ASSESSEE RELATES TO ESTIMATIO N OF SALES AT ABNORMALLY HIGHER FIGURES AND ESTIMATION O F EXORBITANT NET PROFIT RATE BY THE ASSESSING OFFICER. 59. WE HAVE CONSIDERED THE RIVAL CONTENTIONS CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FIN D FROM RECORD THAT THE ASSESSEE WAS ENGAGED IN THE BUSINES S OF MAKING AND SALE OF SWEETS AND NAMKEEN. AS THE ASSE SSEES SALES WERE BELOW RS. 40 LACS NO BOOKS OF ACCOUNTS WERE MAINTAINED AND THE RETURNS WERE FILED BY APPLYING N ET PROFIT -: 84: - 84 RATE OF 5%. IN THE ASSESSMENT YEAR 2000-01 THE ASS ESSEE HAD SHOWN SALES OF RS. 24.80 LACS IN THE ASSESSMENT YE AR 2001-02 RS. 26.80 LACS AND IN THE ASSESSMENT YEAR 2002-03 A T RS. 32 LACS AND IN THE ASSESSMENT YEAR 2003-04 AT RS. 35.6 1 LACS. THE PROFIT WAS OFFERED BY COMPUTING THE NET PROFIT RATE @ 5% ON THE TURNOVER. WITH REGARD TO ADDITION MADE BY THE ASSESSING OFFIC ER BY ESTIMATING SALES AND GP THEREON WE FIND THAT NO MA TERIAL WAS REFERRED BY THE ASSESSING OFFICER FOR ESTIMATION OF SALES AT RS. 1.10 CRORES RS. 1.15 CRORE AND RS. 1.20 CRORE AS A GAINST SALES OF RS. 24.80 LAKHS RS. 26.80 LAKHS AND 32.00 LAKHS SHOWN BY THE ASSESSEE IN THE ASSESSMENT YEARS 2000-01 2001- 02 AND 2002-03 RESPECTIVELY. EVEN NO BASIS WAS GIVEN BY TH E ASSESSING OFFICER FOR APPLYING NET PROFIT RATE OF 1 5 % AS AGAINST RATE OF 5% APPLIED BY THE ASSESSEE. EVEN DURING TH E COURSE OF SURVEY ON 18.12.2002 FALLING IN THE ASSESSMENT YEA R 2003-04 NOTHING WAS FOUND BY THE DEPARTMENT SO AS TO PRESUM E THAT SALE OF THE ASSESSEE WAS TO THE TUNE OF RS. 110 LAC S IN THE ASSESSMENT YEAR 2000-01 RS. 115 LACS IN THE ASSESS MENT YEAR 2001-02 AND RS. 120 LACS IN THE ASSESSMENT YEAR 200 2-03. -: 85: - 85 WITHOUT ANY BASIS OR MATERIAL EVEN FOR NAME SAKE TH E ASSESSING OFFICER HAS JUST ESTIMATED THE SALES OF T HE ASSESSEE AT ABNORMALLY HIGHER FIGURES AND ALSO ESTIMATED NET PROFIT RATE OF 15 % IN PLACE OF NET PROFIT RATE OF ASSESSEE AT 5 % MADE THE TRADING ADDITIONS WHICH WERE CONFIRMED BY THE LEARN ED COMMISSIONER OF INCOME TAX (APPEALS). 60. AS PER OUR CONSIDERED VIEW EVEN WHILE MAKING BE ST JUDGMENT ASSESSMENT THE SAME SHOULD BE BASED ON C OGENT MATERIAL ON RECORD. THE HONBLE SUPREME COURT IN THE CASE OF DHAKESWARI COTTON MILLS LTD. VS. CIT WEST BENGAL REPORTED IN 26 ITR 775 OBSERVED THAT WHILE MAKING AN ASSESSM ENT THE ASSESSING OFFICER IS NOT ALLOWED TO MAKE PURE GUESS WORK WITHOUT ANY EVIDENCE OR MATERIAL AT ALL. THERE MU ST BE SOMETHING MORE THAN BEAR SUSPICION TO SUPPORT ANY ASSESSMENT AND AN ASSESSMENT ORDER PASSED ON ANY SUSPICIOUS CONJUNCTURE AND SURMISES IS LIABLE TO BE SET ASIDE. THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. RANICHERRA TEA CO.LTD. REPORTED IN 207 ITR 979 OBSE RVED THAT WHILE MAKING THE BEST JUDGMENT ASSESSMENT THE A SSESSING OFFICER CANNOT ACT VINDICTIVELY OR CAPRICIOUSLY BEC AUSE HE MUST -: 86: - 86 EXERCISE THE JUDGMENT IN THE MATTER. IN MAKING A BEST JUDGMENT ASSESSMENT THE ASSESSING OFFICER DOES N OT POSSESS ABSOLUTE ARBITRARY AUTHORITY TO ASSESS ANY FIGURE H E LIKES AND THAT ALTHOUGH HE IS NOT BOUND BY STRICT JUDICIAL PR INCIPLES HE SHOULD BE GUIDED BY RULES OF JUSTICE EQUITY AND GO OD CONSCIENCE. THE LIMIT OF THE POWER OF THE ASSESSIN G OFFICER ARE IMPLICIT IN THE EXPRESSION BEST OF HIS JUDGMENT ASSESSMENT THOUGH THERE IS AN ELEMENT OF GUESS WORK IN A BEST JUDGMENT ASSESSMENT IT SHALL NOT BE A WILD ONE BUT SHALL HAVE A REASONABLE NEXUS TO THE AVAILABLE MATERIAL AND CIRC UMSTANCES OF EACH CASE. WHERE THE AO REJECT THE RATES SHOWN B Y THE ASSESSEE HE SHOULD REFER THE MATERIAL OR EVIDENCE WHICH INFLUENCED HIM TO REJECT THE SALES SHOWN BY THE ASS ESSEE. 61. THE HON'BLE SUPREME COURT IN BRIJ BHUSAN LAL PRADUMAN KUMAR ETC. VS. CIT (115 ITR 524) CATE GORICALLY OBSERVED THAT WHILE MAKING BEST JUDGMENT ASSESSMEN T THE ASSESSING OFFICER SHOULD KEEP IN MIND WHAT HONESTLY HE BELIEVES TO BE FAIR ESTIMATION OR THE PROPER FIGURE OF ASSESSMENT. FURTHERMORE HONBLE CALCUTTA HIGH COU RT IN THE CASE OF CIT VS. POPULAR ELECTRIC CO.PVT.LTD. OBSER VED THAT -: 87: - 87 WHILE MAKING BEST JUDGMENT THE ASSESSING OFFICE R SHOULD MAKE INDEPENDENT AND WELL GROUNDED ESTIMATE AND SUC H ESTIMATE MAY BE BASED ON ADEQUATE AND RELEVANT MATE RIALS. 62. AS PER OUR CONSIDERED VIEW BEST JUDGMENT ASSESSMENT IS NOT A PROVISION TO PENALIZE THE ASS ESSEE BUT IS A MACHINERY PROVISION TO ENABLE THE REVENUE TO ASSE SS A PERSON WHEN SITUATION WARRANTS AN ASSESSMENT. EVEN WHILE MAKING AN ESTIMATION THE SAME SHOULD BE RATIONAL AN D SHOULD BE BASED ON AN HONEST GUESS WORK FOR WHICH SOME VAL ID BASIS IS AVAILABLE TO THE ASSESSING OFFICER. THE ORDER INVOLVES EXERCISE OF JUDGMENT BY THE OFFICER. A FAIR EST IMATION OF INCOME HAS TO BE MADE THE ASSESSING OFFICER SHOULD TAKE INTO CONSIDERATION THE TOTALITY OF THE FACTS AND CIRCUMS TANCES OF THE CASE IN ADDITION TO PROPER EVALUATION OF THE MATER IAL FURNISHED BY THE ASSESSEE AND COLLECTED BY HIM BY HIS OWN EFF ORTS. WHERE BEST JUDGMENT ASSESSMENT POWER HAS BEEN CO NFERRED THE LIMITS OF THE POWER ARE IMPLICIT IN THE EXPRESS ION BEST OF HIS JUDGMENT ASSESSMENT . THE JUDGMENT IS VIT AL TO DECIDE THE MATTER WITH WISDOM TRULY AND LEGALLY. JUDGMEN T DOES NOT DEPEND UPON THE ARBITRARY CAPRICIOUS OF THE ASSESSI NG OFFICER -: 88: - 88 BUT ON SETTLED AND INVARIABLE PRINCIPLE OF JUSTICE. THOUGH THERE IS AN ELEMENT OF GUESS WORK IN BEST JUDGMENT ASSESSMENT IT SHALL NOT BE WILD ONE BUT SHALL H AVE REASONABLE NEXUS TO THE AVAILABLE MATERIAL AND CIRC UMSTANCES OF EACH CASE. WHILE ESTIMATING THE PROFIT THE ASS ESSING OFFICER SHOULD BE FAIR & REASONABLE AND SHOULD KEEP INTO AC COUNT THE TURNOVER AND THE GROSS PROFIT OF EARLIER YEARS ALON GWITH ALL THE FACTS AND CIRCUMSTANCES OF THE CASE. IT IS NOT IN D ISPUTE THAT IN ALL THE THREE YEARS UNDER CONSIDERATION THE YEARS U NDER ESTIMATION OF SALES BY THE ASSESSING OFFICER IS NOT BASED ON ANY MATERIAL OR EVIDENCE.. 63. IN THE INSTANT CASE ASSESSMENT FOR THE ASSESSMENT YEAR 2003-04 WHICH WAS FRAMED PRIOR TO THESE ASSESS MENT YEARS THE ASSESSING OFFICER HAS ESTIMATED THE SALE S AT RS.1.25 IN PLACE OF SALES SHOWN BY THE ASSESSEE AT RS. 35.6 1 LACS CRORES AND AFTER APPLYING PROFIT RATE OF 15% MADE T HE TRADING ADDITION. WE FIND THAT THE MATTER TRAVELLED UPTO T HE TRIBUNAL AND THE TRIBUNAL VIDE ITS ORDER DATED 15 TH MAY 2009 UPHELD THE SALES AT RS.50 LACS ON WHICH AFTER APPLYING THE NET PROFIT RATE OF 6% TRADING ADDITION WAS SUSTAINED. THE TRIB UNAL HAS -: 89: - 89 ELABORATELY DEALT WITH ALL THE ISSUES AND FINALLY R EACHED THE CONCLUSION THAT REASONABLE TURNOVER OF THE ASSESSEE COULD AT BEST BE TAKEN AT RS.50 LACS ON WHICH THE RATE OF NE T PROFIT IS TO BE TAKEN AT 6%. AS THE FACTS AND CIRCUMSTANCES OF THE CASE DURING THE YEARS UNDER CONSIDERATION ARE SAME WE RESPECTFULLY FOLLOW THE DECISION OF THE TRIBUNAL IN THE ASSESSEES OWN CASE AND DIRECT THE ASSESSING OFFICE R TO APPLY NET PROFIT RATE OF 6%. FOR THE ASSESSMENT YEAR 200 3-04 IN PLACE OF SALE OF RS. 35.61 LACS AS SHOWN BY THE ASS ESSEE THE REASONABLE ESTIMATED SALE HAS BEEN ACCEPTED BY TRIB UNAL AT RS. 50 LACS. KEEPING IN VIEW THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE VIS--VIS OUR ABOVE OBSER VATION WE DIRECT FOR ESTIMATING THE SALES AT 40% ABOVE THE SA LES DISCLOSED BY THE ASSESSEE IN THE RESPECTIVE YEARS. THUS IN THE ASSESSMENT YEAR 2000-01 WE DIRECT THE ADOPTION OF S ALES OF RS.34.72 LACS IN THE ASSESSMENT YEAR 2001-02 AT RS . 37.52 LACS AND IN THE ASSESSMENT YEAR 2002-03 AT RS.44.80 LACS. ALL THE SALES HAVE BEEN TAKEN BY US AT 140% OF THE SALE S DISCLOSED BY THE ASSESSEE. THE ASSESSING OFFICER IS DIRECTED TO APPLY NET -: 90: - 90 PROFIT RATE OF 6% ON SUCH ENHANCED SALES AND TO WOR K OUT THE G.P. ADDITION ACCORDINGLY. 64. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED IN ALL THE YEARS IN TERMS INDICATED HEREINA BOVE. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 28 TH FEBRUARY 2011. SD/- SD/- (JOGINDER SINGH) (R.C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 28 TH FEBRUARY 2011. CPU* 1828