2004 (6) TMI 239 - AT - Income Tax

Tribunal upholds CIT(A)'s decision, dismissing appeals. Invalid reference to DVO cited. Lack of material for proceedings.

The Tribunal dismissed all departmental appeals and Cross Objections, upholding the CIT(A)'s annulment of assessment orders. The key reasons included the ... Production Of Evidence Issues Involved:1. Validity of reference under section 131(1)(d) of the Income-tax Act.2. Justification of initiating proceedings under section 147/148 of the Income-tax Act.3. Consideration of investment in the assessment year 1999-2000.4. Maintainability of Cross Objection by the assessee.Detailed Analysis:1. Validity of Reference under Section 131(1)(d) of the Income-tax Act:The primary issue was whether the Assessing Officer (AO) was justified in making a reference to the Departmental Valuation Officer (DVO) under section 131(1)(d) without any pending proceedings. The CIT(A) annulled the assessment orders, holding that the reference to the DVO was illegal as no proceedings were pending. The Tribunal upheld this view, citing the Hon'ble Supreme Court's decision in Smt. Amiya Bala Paul v. CIT [2003] 262 ITR 407, which stated that the AO cannot refer a matter to the DVO for estimating the cost of construction unless proceedings are pending. The Tribunal also referenced multiple ITAT decisions supporting the view that references under section 131(1)(d) require pending proceedings.2. Justification of Initiating Proceedings under Section 147/148:The Tribunal examined whether the AO had valid reasons to believe that income had escaped assessment, justifying the issuance of notice under section 148. The AO's reliance on the DVO's report was deemed invalid because the reference to the DVO was not legally justified. The Tribunal emphasized that the belief must be well-founded and based on valid material. Since the AO had no other material apart from the DVO's report, the initiation of proceedings under section 147/148 was not justified. This view was supported by the Hon'ble Supreme Court decisions in ITO v. Lakhmani Mewal Das [1976] 103 ITR 437 and Sheo Nath Singh v. AAC [1971] 82 ITR 147.3. Consideration of Investment in the Assessment Year 1999-2000:The assessee argued that if the investment for the assessment year 1999-2000 was considered, there would be no significant difference in the cost of construction. The CIT(A) had previously accepted this argument for the assessment year 1997-98, and no departmental appeal was filed against that decision, making it final. The Tribunal noted that the same logic applied to the assessment years under appeal, leading to the conclusion that there was no case for any addition. The Tribunal highlighted the Hon'ble Supreme Court decision in Union of India v. Kaumudini Narayan Dalal [2001] 249 ITR 219, which held that the department cannot challenge the correctness of a decision in subsequent cases if it has accepted it in an earlier case.4. Maintainability of Cross Objection by the Assessee:The Tribunal discussed whether the Cross Objection filed by the assessee was maintainable. Although the CIT(A) had annulled the assessments, the Tribunal allowed the assessee to argue the grounds taken in the Cross Objection to support the CIT(A)'s order. The Tribunal referenced the Hon'ble Supreme Court decision in CIT v. Mahalakshmi Textile Mills Ltd. [1967] 66 ITR 710, which held that if relief is justified on another ground, it should be granted. The Tribunal concluded that the Cross Objection, while technically not maintainable, was considered in the context of supporting the CIT(A)'s order.Conclusion:The Tribunal dismissed all departmental appeals and the Cross Objections, upholding the CIT(A)'s annulment of the assessment orders. The key reasons were the invalid reference to the DVO under section 131(1)(d) without pending proceedings, the lack of valid material for initiating proceedings under section 147/148, and the finality of the CIT(A)'s decision for the assessment year 1997-98 regarding the consideration of investment in the assessment year 1999-2000.