DCIT, v. M/s. Baba Kushi Nath Food Product Pvt. Ltd.,

ITA 538/LKW/2010 | 2001-2002
Pronouncement Date: 25-03-2011 | Result: Dismissed

Appeal Details

RSA Number 53823714 RSA 2010
Assessee PAN AACCB2880L
Bench Lucknow
Appeal Number ITA 538/LKW/2010
Duration Of Justice 7 month(s) 8 day(s)
Appellant DCIT,
Respondent M/s. Baba Kushi Nath Food Product Pvt. Ltd.,
Appeal Type Income Tax Appeal
Pronouncement Date 25-03-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 25-03-2011
Date Of Final Hearing 24-03-2011
Next Hearing Date 24-03-2011
Assessment Year 2001-2002
Appeal Filed On 16-08-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL B - BENCH LUCKNOW. BEFORE SHRI H.L.KARWA HON'BLE VICE PRESIDENT AND SHRI N.K.SAINI ACCOUNTANT MEMBER I.T.A.NO.538(LKW.)/2010 A.Y. : 2001-02 THE DY.CIT VS. M/S. BABA KUSHI NATH FOOD PRODUC T SITAPUR. PVT. LTD. BILGRAM ROAD HARDOI. PAN AACCB2880L (APPELLANT) (RESPONDENT) C.O.NO.50 (LKW.)/2010 (IN I.T.A.NO.538(LKW.)/2010) A.Y. : 2001-02 M/S. BABA KUSHI NATH FOOD VS. THE DY.CIT PRODUCT PVT. LTD. HARDOI. SITAPUR. LUCKNOW. PAN AACCB2880L (CROSS OBJECTOR) (RESPONDENT) DEPARTMENT BY : SHRI P.K.BAJAJ SR.D.R. ASSESSEE BY : SHRI ABHINAV MEHROTRA C.A. O R D E R PER N.K.SAINI ACCOUNTANT MEMBER THE APPEAL BY THE DEPARTMENT AND THE CROSS OBJECT ION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 15.4. 2010 OF THE LD.CIT(A) BAREILLY. THE DEPARTMENT HAS RAISED THE FOLLOWING G ROUNDS IN ITS APPEAL: 1. THAT THE PROCESSING OF RETURN OF INCOME U/S 143 (1) WILL TANTAMOUNT TO COMPLETION OF ASSESSMENT PROCEEDINGS. 2. THAT WHEN NO ASSESSMENT PROCEEDINGS HAVE BEEN TA KEN UP IN 2 THE CASE OF THE ASSESSEE BEFORE 30.09.2004 THEN WHE THER THE ASSESSMENT PROCEEDINGS SHALL BE TAKING AS FINAL AND CONCLUSIVE. 3. THAT WHEN THE ASSESSMENT PROCEEDINGS HAVE BEEN T AKEN UP FOR THE FIRST TIME ON 13.03.2008 WHETHER PROVISIONS OF SECTION 142A WILL BE APPLICABLE IN THE CASE OF THE ASSESSEE. 4. THAT THE ORDER OF THE CIT (A) IS ERRONEOUS IN LA W AND ON FACTS MAY BE CANCELLED AND THE ORDER OF THE ASSESSING OFF ICER MAY BE RESTORED. 5. ANY OTHER GROUND WHICH MAY BE TAKEN AT THE TIM E OF APPEAL. 2. THE ASSESSEE IN ITS CROSS OBJECTION HAS RAISED THE FOLLOWING GROUNDS: 1- THAT THE RE-ASSESSMENT ORDER PASSED BY THE ITO HARDOI ON THE BASIS OF NOTICE U/S 148 OF THE I.T. ACT 1961 ISSUE D BY THE DY. CIT SITAPUR WITHOUT JURISDICTION IS LIABLE TO BE C ANCELLED. 2- THAT THE BASIS OF ASSUMPTION OF JURISDICTION FO R RE-ASSESSMENT BY DY.CIT SITAPUR AND ITS CONTINUATION AND CULMINA TION BY THE ITO HARDOI IS BAD IN LAW AS PER FACTS OF THE CASE. 3- THAT THE REFERENCE TO DVO FOR VALUATION OF FACTO RY BUILDING WAS WRONG AS NO PROCEEDINGS FOR A.Y. 2001-02 WAS P ENDING. 4- THAT THE VALUATION OF BUILDING SHOULD BE DONE O N UPPWD RATES AND THE COST AS PER BOOKS HAD BEEN CORRECTLY SHOWN. THE VALUATION AS PER CPWD RATES BY DVO IS LIABLE TO BE CANCELLED. 3. AT THE FIRST INSTANCE WE WILL DEAL WITH THE CRO SS OBJECTION FILED BY THE ASSESSEE. 4. THE FACTS OF THE CASE IN BRIEF ARE THAT DURIN G THE YEAR UNDER CONSIDERATION FLOUR MILL OF THE ASSESSEE WAS UNDER CONSTRUCTION. THE AO 3 DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2003- 04 SENT A PROPOSAL UNDER SECTION 142A DATED 13.1.2 006 TO THE DVO WHO VIDE HIS REPORT DATED 26.12.2006 ESTIMATED THE COS T OF CONSTRUCTION AT RS.87 61 000 AS AGAINST RS.54 96 996 DISCLOSED BY T HE ASSESSEE. THE DVO FURTHER BIFURCATED YEAR-WISE COST OF CONSTRUCTION WHICH FOR THE YEAR UNDER CONSIDERATION WAS ESTIMATED AT RS.53 89 767 AS AGA INST RS.30 81 811 SHOWN BY THE ASSESSEE. AS SUCH THERE WAS A DIFFERE NCE OF RS.23 07 956 IN THE VALUATION ESTIMATED BY THE DVO AND THE COST OF CONSTRUCTION DISCLOSED BY THE ASSESSEE. ON THE BASIS OF DVOS REPORT THE AO INITIATED THE PROCEEDINGS UNDER SECTION 147 OF THE I.T.ACT BY STA TING THAT THE DEPARTMENTAL VALUATION OFFICERS REPORT (BEING TECH NICAL PERSON) WAS GOOD BASIS FOR INITIATING RE-ASSESSMENT UNDER SECTION 147 OF THE I.T. ACT. ACCORDINGLY NOTICE DATED 13.3.2008 U/S 148 WAS ISS UED AND SERVED UPON THE ASSESSEE ON 19.3.2008. IN COMPLIANCE TO THE NOTICE UNDER SECTION 148 OF THE I.T.ACT THE ASSESSEE STATED THAT THE RETURN FOR T HE YEAR UNDER CONSIDERATION SHOWING NIL INCOME HAD ALREADY BEEN FILED AND THE S AME MAY BE TREATED AS RETURN IN RESPONSE TO THE NOTICE UNDER SECTION 148 OF THE I.T.ACT. HOWEVER THE ASSESSEE RAISED THE FOLLOWING OBJECTIONS BEFORE THE AO. 1. THE ISSUE OF NOTICE U/S.148 OF THE I.T ACT 1961 BY YOUR HONOUR IS WITHOUT JURISDICTION AS HAD BEEN STATED IN DETAILS EARLIER REPLY. 2. WITHOUT POINTING OUT ANY DEFECT IN THE BOOKS OF ACCOUNT AND THE ASSESSMENT HAVING COMPLETED BEFORE 30.9.2004 THE R EFERENCE TO D.V.O U/S.142A OF THE I.T.ACT 1961 IS NOT CORRECT. 3. FROM THE PERUSAL OF DVO REPORT RECEIVED FROM YOU R HONOUR ALONGWITH NOTICE U/S.142(1) DATED 19.4.2008 FOR THE FIRST TIME IT IS SEEN THAT THE CPWD RATES HAD BEEN APPLIED WHICH ARE NOT TO BE APPLIED ONLY UPPWD RATES HAVE TO BE APPLIED AS HELD BY HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF SHRI RA J KUMAR. 4 4. THERE CAN NOT BE ANY REASSESSMENT ONLY ON THE D. V.O. REPORT AND ISSUE OF NOTICE U/S.148 IS ONLY ON OPINION OF DVO IS NOT VALID. 4.1 THE AO DID NOT FIND MERIT IN THE ABOVE OBJECTI ONS OF THE ASSESSEE. HE ALSO MENTIONED THAT FOR ESTIMATING INVESTMENT OR F OR VALUATION OF THE PROPERTY REJECTION OF BOOKS OF ACCOUNTS WAS NOT NE CESSARY AND THAT IN THE ASSESSEES CASE NO REGULAR ASSESSMENT HAD BEEN COMP LETED. THEREFORE COMPLETION OF ASSESSMENT BY 30.9.2004 AS PROVIDED IN SECTION 142A OF THE I.T.ACT WAS NOT APPLICABLE. THE AO MADE THE ADDITIO N OF RS.23 07 956 BEING THE DIFFERENCE OF THE VALUATION ESTIMATED BY THE DV O AND THE COST OF CONSTRUCTION DECLARED BY THE ASSESSEE. 5. THE ASSESSEE CARRIED THE MATTER TO THE LD.CIT(A) AND THE SUBMISSIONS MADE BEFORE HIM ARE REPRODUCED VERBATIM AS UNDER : THE INCOME FOR THIS YEAR HAD ALREADY BEEN DETERMI NED AS PER RETURN OF INCOME FILED ON 17.9.2001 PRIOR TO 30.9 .2004 THE RE- ASSESSMENT MAY KINDLY BE CANCELLED. IN THE CASE OF CIT VS. IQBAL HUSSAIN 320 ITR 142( 2010) THE HON'BLE ALLAHABAD HIGH COURT HELD AS UNDER : THE ORIGINAL ASSESSMENT ON THE ASSESSEE U/S 143(1 )(A) OF THE INCOME TAX ACT WAS COMPLETED ON NOVEMBER 19 1992. REASSESSMENT PROCEEDINGS U/S.148 OF THE ACT WERE IN ITIATED AND ON THE BASIS OF THE REPORT OF THE DISTRICT VALUATI ON OFFICER INVESTMENT IN PROPERTY WAS ADDED. THE TRIBUNAL SET ASIDE THE REASSESSMENT ORDER. ON APPEAL TO THE HIGH COURT : HELD DISMISSING THE APPEAL THAT IN VIEW OF THE P ROVISO TO SECTION 142A OF THE ACT REFERENCE TO THE DEPARTMEN TAL VALUATION OFFICER FOR THE PURPOSE OF REASSESSMENT C ANNOT BE TAKEN IF THE ASSESSMENT HAS BECOME FINAL BETWEEN T HE PARTIES 5 BEFORE SECTION 142A WAS INSERTED I.E. SEPTEMBER 30 2004. THE ORDER OF THE TRIBUNAL WAS VALID. SIMILAR VIEWS HAD BEEN GIVEN IN THE CASE OF CIT VS .GULAM MOHD. 320 ITR 168 (ALL.) CIT VS. LEATHER TRENDS (P .) LTD. AND CIT VS.R.J.ROLLER FLOUR MILL (P.) LTD. SHAHJAHANPUR BY THE ALLAHABAD HIGH COURT. IN THE CASE OF MANJUSHA ESTATE (P.) LTD. VS. ITO (2 009) 226 CTR (GUJ.) 283 THE GUJARAT HIGH COURT HELD THAT: ADMITTEDLY THE RETURN OF INCOME FOR A.Y.2000-01 WH ICH WAS FILED ON 30 TH NOVE. 2000 WAS ACKNOWLEDGE ON THE SAME DAY AND WAS NOT FOLLOWED BY ANY ASSESSMENT ORDER. THEREFORE IT CANNOT BE STATED THAT THERE WAS ANY ASSESSMENT. HOWEVER F OR INVOKING PROVISIONS OF SECTION 142A THE FIRST REQUIREMENT OF THE PROVISION IS THAT WHERE AN ESTIMATE OF THE VALUE OF ANY INVESTMENT REFERRED TO IN SECTION 69 OR SECTION 69 A OR SECTION 69B IS REQUIRED TO BE MADE THE AO MAY IN HIS DISCR ETION REQUIRE THE VALUATION OFFICER TO MAKE AN ESTIMATE O F SUCH VALUE BUT THE OPENING PORTION OF SUB-SECTION (1) OF SECTI ON 142A STIPULATES THAT THE AO CAN UNDERTAKE SUCH AN EXERCI SE ONLY FOR THE PURPOSES FOR MAKING AN ASSESSMENT OR REASSESSME NT UNDER THE ACT. IT IS FURTHER SUBJECT TO THE PROVISO WHICH SAYS THAT NOTHING CONTAINED IN THIS SECTION SHALL APPLY IN R ESPECT OF AN ASSESSMENT MADE ON OR BEFORE THE 30 TH SEPT. 2004 AND WHERE SUCH ASSESSMENT HAS BECOME FINAL AND CONCLUSIVE ON OR BEFORE 30 TH SEPT. 2004. IT IS APPARENT THAT AS PER SCHEME OF T HE ACT THE INCOME RETURNED BY THE ASSESSEE HAD BEEN ASSESSED A S SUCH WITHOUT ANY VARIATION ON 30 TH NOVE. 2000 NAMELY BEFORE 30 TH SEPT. 2004. THEREFORE PROVISIONS OF SECTION 142A C OULD NOT HAVE BEEN INVOKED BY THE RESPONDENT AUTHORITY. THE FACTS OF CASE ARE THAT THE ASSESSEE FURNISHED RETURN OF INCOME ON 17.9.2001 WHICH WAS PROCESSED U/S 143(1). THE ASSESSING OFFICER REOPENED ASSESSMENT AND INITIATED PROCEEDIN GS ON 13.3.2008 ON THE BASIS OF THE REPORT DATED 26.12.2006 OF THE DEPARTMENTAL VALUATION OFFICER OBTAINED DURING ASSESSMENT PROCEE DINGS FOR A.Y.2003-04. THE A.R. OF THE ASSESSEE CONTENDED THA T THE ACTION OF INITIATION OF PROCEEDINGS U/S 147 WAS AGAINST THE P ROVISO TO SECTION 6 142A BECAUSE THE ASSESSMENT BECAME FINAL BEFORE 30. 9.2004. HE RELIED ON THE DECISIONS (SUPRA) OF THE JURISDICTION AL HIGH COURT IN SUPPORT OF HIS CLAIM. THE ASSESSING OFFICER ADMITT EDLY INITIATED RE- ASSESSMENT PROCEEDINGS ON 13.3.2008 WHICH WAS AFTER 30.9.2004 AS MENTIONED ABOVE. 6. THE LD.CIT(A) AFTER CONSIDERING THE SUBMISSION S OF THE ASSESSEE ALLOWED THE APPEAL PREFERRED BEFORE HIM AND HELD T HE RE-ASSESSMENT PROCEEDINGS AS INVALID BY OBSERVING AS UNDER : I HAVE GONE THROUGH THE CONTENTS OF THE ORDER OF THE AO AND ALSO THE SUBMISSION OF THE APPELLANT. IT IS AN UNDI SPUTED FACT THAT THE ACTION OF THE AO WAS SOLELY BASED ON THE REPORT OF THE DVO WHICH WAS OBTAINED AFTER 30.9.2004. THIS POSITION OF LAW HAS BEEN CONFIRMED BY THE HON'BLE ALLAHABAD HIGH COURT IN SEVERAL CASES ( SUPRA). THE FACTS OF THE CASES CITED BY THE APPELLANT ARE FULLY APPL ICABLE TO THE FACTS OF THE PRESENT CASE. THEREFORE THE ACTION OF THE AO IS NOT SUSTAINABLE AND HELD AS INVALID. THIS GROUND OF APPEAL IS ALLOW ED. SINCE THE INITIATION OF THE RE-ASSESSMENT PROCEEDI NGS HAS BEEN HELD AS INVALID THE OTHER GROUNDS OF APPEAL DO NOT REQUIRE ANY ADJUDICATION. 7. NOW THE ASSESSEE HAS FILED THE CROSS OBJECTION STATING THEREIN THAT THE RE-ASSESSMENT ORDER PASSED BY THE AO ON THE BAS IS OF NOTICE UNDER SECTION 148 OF THE I.T.ACT WAS LIABLE TO BE CANCEL LED. 8. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THE RE-OPENING IN THIS CASE WAS SOLELY BASED ON THE DVOS REPORT AND THE A O DID NOT POINT OUT THAT HOW THE COST OF CONSTRUCTION DECLARED BY THE ASSESS EE IN ITS BOOKS OF ACCOUNTS WAS WRONG. THEREFORE THE REASSESSMENT ORD ER WAS LIABLE TO BE CANCELLED. RELIANCE WAS PLACED ON THE FOLLOWING CAS E LAWS: 7 (I) SARGAM CINEMA VS. CIT (2010) 328 ITR 513(SC) (II) ACIT VS. DHARIYA CONSTRUCTION CO. (2010) 328 ITR 515(SC) (III) CIT VS. JEEVANDEEP APARTMENTS (P.) LTD. (ITA NO.150 OF 2005 DECIDED ON 7.7.2009) (IV) CIT VS. GULAM MOHAMMAD (2010) 320 ITR 168 (ALL.) (V) CIT VS. LEATHER TRENDS (P.) LTD. (ITA NO.476 OF 200 5 DECIDED ON 30.4.2009) (VI) CIT VS. IQBAL HUSSAIN (2010) 320 ITR 142 (ALL.) (VII) CIT VS. R.J.ROLLER FLOUR MILL(P.) LTD. (ITA NO.352 OF 2005 DECIDED ON 8.9.2009) (VIII) MANJUSHA ESTATE (P.) LTD. VS. ITO (2009) 226 ITR 26 3(GUJ.) (IX) DECISION OF THE ITAT LUCKNOW BENCH IN THE CASE OF GOPI APARTMENTS VS. ACIT (ITA NO.75 OF 2010 DECIDED ON 28.6.2010). 8.1 IT WAS FURTHER SUBMITTED THAT THE ISSUE IS SQUA RELY COVERED BY THE DECISION OF THIS BENCH OF THE TRIBUNAL DATED 26.5. 2010 IN ITA NOS.259 & 260(LUC.)/2010 IN THE CASE OF ITO-III FAIZABAD VS. SHREE RAM VERMA BURHNAPUR MOTIGARPUR BASKHARIM AKBARPUR AMBEDKARN AGAR. A COPY OF THE SAID ORDER WAS FURNISHED. 9. IN HIS RIVAL SUBMISSIONS THE LD.D.R. SUPPORTED THE ORDER OF THE AO AND FURTHER SUBMITTED THAT THE ORIGINAL ASSESSMENT FOR THE ASSESSMENT YEAR WAS NOT FRAMED UNDER SECTION 143(3) OF THE ACT AN D THEREFORE IT CANNOT BE SAID THAT THE AO APPLIED HIS MIND WHILE FRAMING TH E ASSESSMENT AND SINCE THE VALUATION REPORT DISCLOSED HIGHER INVESTMENTS I N THE CONSTRUCTION THE AO RIGHTLY MADE THE ADDITION AS SUCH THE LD.CIT(A) WA S NOT JUSTIFIED IN DELETING THE SAME. RELIANCE WAS PLACED ON THE FOLLOWING CASE LAW. (I) SUNDER CARPET INDUSTRIES VS. ITO & ANOTHER (201 0) 45 DTR (ALL.) 173. 10. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IN TH E INSTANT CASE IT IS NOTICED 8 THAT THE AO WHILE ISSUING THE NOTICE UNDER SECT ION 148 OF THE I.T.ACT RECORDED THE FOLLOWING REASONS : DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR T HE A.Y.2003- 04 PROPOSALS U/S.142A DATED 13.1.2006 WAS SENT TO T HE DEPARTMENTAL VALUATION OFFICER WHO VIDE HIS REPORT DATED 26.12. 2006 HAS SUBMITTED VALUATION REPORT ESTIMATING COST OF RS.87 61 000/- AS AGAINST RS.54 96 996/-DISCLOSED BY THE ASSESSEE. DE PARTMENTA1 VALUATION OFFICER HAS FURTHER BIFURCATED YEARWISE C OST OF CONSTRUCTION. WHILE BIFURCATING THE COST OF CONSTRUCTION DEPARTME NTAL VALUATION OFFICER FOR THE F.Y.2000-01 RELEVANT TO A.Y.2001-02 HAS ESTIMATED COST OF CONSTRUCTION AT RS.53 89 767/- AS AGAINST R S.30 81 811/- SHOWN BY THE ASSESSEE MEANING THEREBY A DIFFERENCE OF RS. 23 07 956/. VALUATION REPORT U/S. 142A OF THE I.T.ACT 1961 WIT H REFERENCE TO PROVISION OF SECTION 16A OF W.T.ACT IS BINDING ON T HE A.O. FURTHER DEPARTMENTAL VALUATION OFFICER'S REPORT (BEING TECH NICAL PERSON) IS GOOD PIECE OF EVIDENCE FOR INITIATING RE-ASSESSMENT U/S.147 OF THE I.T.ACT 1961. IN THE SET OF ABOVE FACTS I HAVE REASON TO BELIEVE THAT INCOME TO THE EXTENT OF RS.23 07 956 HAS BEEN ESCAPED TO ASSESSMENT. AFTER OBTAINING APPROVAL OF THE ADDL.CIT SITAPUR THROUGH LETTER F.NO.147/148/ADDL. CIT/STP/07-08/1486 DATED 13.3.20 08 NOTICE U/S.148 OF IT.ACT 1961 HAS BEEN ISSUED. SD. T.RAM DEPUTY COMMISSIONER OF INCOME-TAX SITAPUR. THE ABOVE REASONS HAVE BEEN MENTIONED AT PAGE 1 OF THE ASSESSMENT ORDER ALSO. FROM THE ABOVE REASONS IT IS CLEAR THAT THE AO ISSUED THE NOTICE UNDER SECTION 148OF THE I.T.ACT SOLELY ON THE BASIS OF DV OS REPORT. HE DID NOT POINT OUT HOW AND IN WHAT MANNER THE COST OF CONST RUCTION DECLARED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT WAS NOT CORRECT. H E MADE THE ADDITION CONSIDERING THE VALUATION ESTIMATED BY THE DVO AS C ORRECT INSTEAD OF THE COST OF CONSTRUCTION DECLARED BY THE ASSESSEE. SIMI LAR ISSUE HAVING IDENTICAL 9 FACTS HAS BEEN ADJUDICATED BY THIS BENCH OF THE TRI BUNAL IN THE AFORESAID REFERRED TO CASE OF ITO-III FAIZABAD VS. SHREE RA M VERMA BURHNAPUR MOTIGARPUR BASKHARI AKBARPUR AMBEDKARNAGAR IN I. T.A.NOS.259 & 260(LUC.)/2010 FOR THE ASSESSMENT YEARS 2002-03 AND 2003-04 RESPECTIVELY. THE RELEVANT FINDINGS HAVE BEEN GIVEN IN PARAS 6 TO 6.4 OF THE ORDER DATED 26.5.2010 WHICH READ AS UNDER : 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CA REFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN THE I NSTANT CASE IT IS NOT IN DISPUTE THAT THE ASSESSING OFFICER ISSUED NOTICE U/ S 148 OF THE ACT SOLELY ON THE BASIS OF D.V.O.S REPORT NO OTHER REASON WA S GIVEN. ON A SIMILAR ISSUE THIS BENCH OF THE TRIBUNAL IN THE CASE OF INC OME TAX OFFICER VS. SHRI MAHARANI DEEN PANDEY IN I.T.A. NO.433/LUC/08 FOR TH E ASSESSMENT YEAR 2000-2001 VIDE ORDER DATED 24/10/2008 OBSERVED AS UNDER: 7. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE IT IS NOT IN DISPUTE THAT THE BASI S FOR REOPENING OF THE ASSESSMENT WAS THE D.V.O.S REPORT. NOW QUESTI ON ARISES WHETHER THE REOPENING CAN BE MADE ONLY ON THE BASIS OF D.V.O.S REPORT. IN THIS REGARD THE HON'BLE CALCUTTA HIGH C OURT IN THE CASE OF KAJARIA INVESTMENT AND PROPERTIES (P) LTD. VS. I TO & OTHERS 250 ITR 619 (CAL) HAS HELD AS UNDER: VALUATION IS ALWAYS A QUESTION OF OPINION AND UNLESS THERE IS A CLEAR FINDING ON THE BASIS OF THE MATERIAL THAT THE ASSESSEE HAS INVESTED IN THE CONSTRUCTION MORE THAN WHAT HAS BEEN SHOWN BY IT IN THE COURSE OF ASSESSMENT PROCEEDINGS THE INCOME TAX OFFICER CANN OT PROCEED MERELY ON THE BASIS OF THE VALUATION REPORT OF THE DEPARTMENTAL VALUE. 10 8. IN THE INSTANT CASE AS THERE WAS NO INVESTMENT I N THE ASSETS BY THE ASSESSEE IN THE YEAR FOR WHICH NOTICE U/S 148 WAS ISSUED SO THE REOPENING ONLY ON THE BASIS OF REPOR T OF THE D.V.O. WAS NOT VALID. 8.1 SIMILARLY THE HON'BLE PUNJAB & HARYANA HIGH COU RT IN THE CASE OF CIT VS. SURESH KUMAR 275 ITR 253 (P&H) HAS HELD AS UNDER: THAT A READING OF THE REASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER SHOWED THAT HE HAD ISSUED SHOW-CAUSE NOTICE TO THE ASSESSEE UNDER SECTION 147 OF THE ACT SOLELY ON THE BASIS OF THE DEPARTMENTAL VAL UERS REPORT. THE PROCEEDINGS WERE INITIATED BECAUSE THE ASSESSING OFFICER CHANGED HIS OPINION ON THE ISSUE OF VALUATION OF THE CONSTRUCTION. THE REASSESSMENT PROCEEDINGS WERE NOT VALID. 9. IN THE PRESENT CASE ALSO AS WE HAVE ALREADY NOT ED THAT THE NOTICE U/S 148 HAS BEEN ISSUED BY THE ASSESSING OFFICER SOLELY ON THE BASIS OF D.V.O.S REPORT THEREFORE THE REASSESSMENT PROCEEDINGS WERE NOT VALID. 10. SIMILAR VIEW HAS BEEN TAKEN BY HON'BLE MADRAS H IGH COURT IN THE CASE OF CIT VS. V. T. RAJENDRAN 288 IT R 312 WHEREIN IT HAS BEEN HELD THAT THE REPORT OF THE DEPARTMENTAL VALUATION OFFICER COULD NOT BE THE BASIS FOR REASSESSMENT BECAUSE THE VALUA TION CANNOT BE AN ARITHMETICAL APPRECIATION OF THE MATER IALS USED FOR THE CONSTRUCTION OR THE EXPENSES INCURRED BY THE 11 ASSESSEE IN THAT REGARD. THE TRIBUNAL WAS RIGHT AN D THE REASSESSMENT WAS NOT VALID. 11. IN THE PRESENT CASE ALSO THE REPORT OF THE D.V. O. WAS ONLY THE BASIS FOR ISSUING THE NOTICE U/S 148 OF THE ACT THEREFORE THE REASSESSMENT WAS NOT VALID. 12. WE THEREFORE CONSIDERING THE TOTALITY OF THE FACT OF THE PRESENT CASE AS DISCUSSED HEREIN ABOVE DO NOT SEE ANY INFIRMITY IN THE ORDER OF LEARNED CIT(A). 6.1 ON A SIMILAR ISSUE THE HON'BLE JURISDICTIONAL H IGH COURT IN THE CASE OF FUSION ELECTRONICS PVT. LTD. VS. INCOME TAX DEPA RTMENT THROUGH CCIT (SUPRA) OBSERVED AS UNDER: FROM THE RECORD IT APPEARS THAT THE ASSESSEE HAS CONSTRUCTED A FACTORY WHICH WAS COMPLETED WITHIN TH REE YEARS. ON THE BASIS OF THE D.V.O.S REPORT WHICH WAS SOUG HT DURING THE PREVIOUS ASSESSMENT YEAR THE ASSESSING OFFICER HAS MADE THE ADDITION IN THE EARLIER ASSESSMENT YEAR BUT THE SAM E WERE DELETED BY THE CIT(A). HOWEVER DURING THE ASSESSM ENT YEAR UNDER CONSIDERATION IMPUGNED NOTICE FOR REOPENING THE ASSESSMENT WAS ISSUED ALONG WITH THE REASONS WHICH WERE SOLELY BASED ON THE D.V.O.S REPORT. IT MAY BE MENTIONED THAT AS PER THE RATIO LAID DOW N IN THE CASE OF CIT VS. K. RAJAPANDIAN [2009] 311 ITR 4 77 (MAD.) IT WAS OBSERVED THAT: IN CASE OF A CONSTRUCTION OF A BUILDING BY THE ASSESSEE FOR A REASSESSMENT TO BE MADE THE REPORT OF THE DEPARTMENTAL VALUATION OFFICER CANNOT BE A BASI S 12 BECAUSE THE VALUATION CANNOT BE AN ARITHMETICAL APPRECIATION OF THE MATERIALS USED FOR THE CONSTRUC TION NOR THE EXPENSES INCURRED BY THE ASSESSEE IN THAT R EGARD AS VARIATIONS ARE BOUND TO BE THERE. FURTHER IN THE CASE OF CIT VS. V. T. RAJENDRAN [20 07] 288 ITR 312 (MAD.) IT WAS OBSERVED THAT: THE REPORT OF THE DEPARTMENTAL VALUATION OFFICER COULD NOT BE THE BASIS FOR REASSESSMENT BECAUSE THE VALUATION CANNOT BE AN ARITHMETICAL APPRECIATION OF THE MATERIALS USED FOR THE CONSTRUCTION OR THE EXPENSES INCURRED BY THE ASSESSEE IN THAT REGARD. THE TRIBU NAL WAS RIGHT AND THE REASSESSMENT WAS NOT VALID. IN THE LIGHT OF ABOVE SETTLED LEGAL POSITION WE SE T ASIDE THE IMPUGNED NOTICE ISSUED BY THE DEPARTMENT U/S 14 8 OF THE I.T. ACT AS THE SAME WAS ISSUED SOLELY BASED ON THE D.V.O.S REPORT. IN THE RESULT THE WRIT PETITION IS ALLOWED. NO OR DER TO COSTS. 6.2 RECENTLY THE HON'BLE APEX COURT IN THE CASE OF ACIT VS. DHARIA CONSTRUCTION CO. IN CIVIL APPEAL NO. 9468 OF 2003 V IDE ORDER DATED 16/12/2010 (COPY ON RECORD) HAS HELD AS UNDER: HAVING EXAMINED THE RECORD WE FIND THAT IN THIS C ASE THE DEPARTMENT SOUGHT REOPENING OF THE ASSESSMENT BASED ON THE OPINION GIVEN BY THE DISTRICT VALUATION OFFICER (DV O). OPINION OF THE DVO PER SE IS NOT AN INFORMATION FOR THE PURPOS ES OF REOPENING ASSESSMENT UNDER SECTION 147 OF THE INCOM E TAX ACT 13 1961. THE AO HAS TO APPLY HIS MIND TO THE INFORMATI ON IF ANY COLLECTED AND MUST FORM A BELIEF THEREON. IN THE CI RCUMSTANCES THERE IS NO MERIT IN THE CIVIL APPEAL. THE DEPARTME NT WAS NOT ENTITLED TO REOPEN THE ASSESSMENT. CIVIL APPEAL IS ACCORDINGLY DISMISSED. NO ORDER AS TO COSTS. 6.3 WE THEREFORE KEEPING IN VIEW THE RATIO LAID D OWN BY THE HON'BLE APEX COURT IN THE AFORESAID REFERRED TO CASE ARE O F THE CONFIRMED VIEW THAT THE LEARNED CIT(A) WAS FULLY JUSTIFIED IN CANC ELLING THE ORDER PASSED BY THE ASSESSING OFFICER U/S 144 READ WITH SECTION 147 OF THE ACT. 6.4 AS REGARDS TO THE JUDGMENT OF HON'BLE JURISDICT IONAL HIGH COURT IN THE CASE OF SMT. SHASHI JAIN (SUPRA) HEAVILY RELIE D BY THE LEARNED D. R. IT IS NOTICED THAT IN THE SAID CASE THE VALUER HAD NOT GIVEN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE BEFORE MAKING THE VALUA TION. IT WAS OBSERVED THAT THE PETITIONER WILL HAVE OPPORTUNITY TO CONTEST THE CORRECTNESS OF THE VALUERS REPORT DURING THE COURS E OF ASSESSMENT PROCEEDINGS IN PURSUANCE OF NOTICE U/S 148 AND THAT NO NOTICE WAS REQUIRED TO BE GIVEN TO THE ASSESSEE BEFORE ISSUANC E OF NOTICE U/S 148. HOWEVER IN THE RECENT JUDGMENT THE HON'BLE JURISD ICTIONAL HIGH COURT IN THE CASE OF FUSION ELECTRONICS (SUPRA) HAS SET ASID E THE NOTICE ISSUED BY THE DEPARTMENT U/S 148 OF THE ACT AS THE SAME WAS I SSUED SOLELY ON THE BASIS OF D.V.O.S REPORT. IT IS WELL SETTLED THAT WHEN TWO DIFFERENT DECISIONS ARE AVAILABLE ON AN ISSUE THE ONE WHICH IS IN FAVOUR OF THE ASSESSEE IS TO BE FOLLOWED AS HAS BEEN HELD BY THE HON'BLE APEX COURT IN THE CASE OF MYSORE MINERALS LTD. VS. CIT [1999] 239 ITR 775 WHEREIN IT HAS BEEN HELD THAT: THE PROVISIONS SHOULD BE SO INTERPRETED AND THE WO RDS USED THEREIN SHOULD BE ASSIGNED SUCH MEANING AS WOULD EN ABLE THE ASSESSEE TO SECURE THE BENEFIT INTENDED TO BE GIVEN BY THE LEGISLATURE TO THE ASSESSEE. IT IS ALSO WELL SETTL ED THAT WHERE 14 THERE ARE TWO POSSIBLE INTERPRETATIONS OF A TAXING PROVISION THE ONE WHICH IS FAVOURABLE TO THE ASSESSEE SHOULD BE P REFERRED. THEREFORE THE CASE RELIED BY THE LEARNED D. R. IS O F NO HELP TO THE REVENUE DEPARTMENT. MOREOVER THE CONTROVERSY INVO LVED IN THE PRESENT CASE HAS NOW BEEN SETTLED BY THE HON'BLE APEX COURT IN THE AFORESAID REFERRED TO CASE OF ACIT VS. DHARIYA CONSTRUCTION C OMPANY (SUPRA). WE THEREFORE CONSIDERING THE TOTALITY OF THE FACTS AN D THE VARIOUS JUDICIAL PRONOUNCEMENT DISCUSSED HEREIN ABOVE ARE OF THE CO NFIRMED VIEW THAT THE LEARNED CIT(A) WAS FULLY JUSTIFIED IN SETTING A SIDE THE ASSESSMENT ORDERS PASSED BY THE ASSESSING OFFICER BY REOPENING THE ASSESSMENT U/S 147 OF THE ACT SOLELY ON THE BASIS OF THE D.V.O.S REPORT. ACCORDINGLY WE DO NOT SEE ANY MERIT IN THESE APPEALS OF THE DEPART MENT. 10.1 SO RESPECTFULLY FOLLOWING THE AFORESAID REFERR ED TO ORDER WE ALLOW THE CROSS OBJECTION OF THE ASSESSEE AND THE ASSESSMENT ORDER WHICH HAS ALSO BEEN HELD BY THE LD.CIT(A) AS INVALID IS QUASHED. 10.2 AS REGARDS TO THE JUDGMENT OF THE HON'BLE JUR ISDICTIONAL HIGH COURT RELIED UPON BY THE LD.D.R. IN THE CASE OF SUNDER C ARPET INDUSTRIES VS. ITO & ANOTHER (SUPRA) IS CONCERNED IN THE SAID CASE THE COST OF CONSTRUCTION HAD NOT BEEN DISCLOSED IN THE BOOKS OF ACCOUNTS THEREF ORE IT WAS HELD THAT THERE WAS MATERIAL ON RECORD TO FORM THE BELIEF THAT THER E WAS ESCAPED ASSESSMENT AND THE NOTICE UNDER SECTION 148 CANNOT BE SAID TO BE WITHOUT ANY MATERIAL. HOWEVER IN THE INSTANT CASE WE HAVE ALREADY POI NTED OUT THAT THE ASSESSEE DISCLOSED THE COST OF CONSTRUCTION THIS FACT HAS A LSO BEEN CONSIDERED BY THE AO AND DULY MENTIONED IN THE ASSESSMENT ORDER. THER EFORE THE FACTS OF THE CASE RELIED UPON BY THE LD.D.R. ARE DISTINGUISHABLE FROM THE FACTS OF THE ASSESSEES CASE. 15 11. AS REGARDS TO THE APPEAL OF THE DEPARTMENT IS C ONCERNED WHEREIN THE ACTION OF THE LD.CIT(A) IN CONSIDERING THE RE-ASSES SMENT ORDER AS INVALID HAS BEEN CHALLENGED IT IS NOTICED THAT THE VIEW TAKEN BY THE LD.CIT(A) IS IN CONSONANCE WITH THE JUDGMENT OF THE HON'BLE SUPREM E COURT IN THE CASE OF ACIT VS. DHARIYA CONSTRUCTION CO. (2010) 328 ITR 5 15(SC) WHEREIN IT HAS BEEN HELD AS UNDER: THE OPINION GIVEN BY THE DISTRICT VALUATION OFFICE R IS NOT PER SE INFORMATION FOR THE PURPOSE OF REOPENING AN ASSESSM ENT UNDER SECTION 147 OF THE INCOME-TAX ACT 1961. IN VIEW OF THE ABOVE WE DO NOT SEE ANY MERIT IN TH E DEPARTMENTAL APPEAL IN I.T.A.NO.538(LKW.)/2010. ACCORDINGLY THE SAME IS DISMISSED. 12. IN THE RESULT THE APPEAL OF THE DEPARTMENT IS DISMISSED AND THE CROSS OBJECTION OF THE ASSESSEE IS ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 25.3.11. SD. SD. (H.L.KARWA) (N.K.SAINI) VICE PRESIDENT ACCOUNTANT MEMBER MARCH 25TH 2011. COPY TO THE : 1. APPELLANT 2. RESPONDENT 3. CIT(A) (4) CIT 5.DR. A.R. ITAT LUCKNOW. SRIVASTAVA.