TaxTMI 
TaxTMI 
2010 (6) TMI 483
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....ollowing grounds in its appeal :- i) The Ld. CIT(A) has erred in law and on facts in restricting the addition of Rs,2,18,26,105/-made on account of unexplained investment in cost of construction of building to Rs.43,59,881/- iii] The Ld. CIT(A) has erred in law and on facts in deleting the addition on account of unexplained investment in the construction of the building on the basis of the valuation report of the DVO, on reference under section 142A of the Act? iv] The Ld. CIT(A) has erred in law and on facts in restricting the addition made for the value of extra items not included in the plinth area of Rs.2,28,92,921/- to Rs,94,87,505/- on the ground that assessee has produced all the vouchers or extra items before the DVO, ignoring that the assessee has failed to produce the same before the DVO or the A.O. during the course of assessment proceedings and the submission before the Ld CIT(A) was an attempt to suppress the valuation of construction emanated from after thought. v) The Ld. CIT(A) has erred in law and on facts in granting benefit of 20% in the cost of built up area on the ground that DVO himself stated that variation of 20% is possible in the cost of constr....
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....f appeal. 4. On the other hand, Ld. SR-DR, Shri Jayant Jhaveri made no serious arguments as regards to admission of additional grounds but stated that there is no reasonable cause for not raising before the Tribunal at the time of filing of appeal. He stated that the grounds should not be admitted solely on this aspect. 5. Seeing the issue being legal as raised in the additional grounds, we admit these legal grounds and adjudicate accordingly. 6. The first legal issue raised is that the cost of construction was referred to the DVO without pendency of any proceedings under the Act. The brief facts of the case are that a search and seizure action in the case of assessee was conducted on 7/3/2006. During the course of search & seizure operation certain incriminating documents belonging to different concerns/companies/individuals of the group was found on the basis of which the assessee group made a disclosure of Rs.8.25 crores. The assessee group has also furnished break up of the disclosure made by it during the course of search and seizure action and the group has disclosed unaccounted income of Rs.1,00,00,000/- in the hands of Rajhans Builders, the assessee. It was the con....
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....ion 69C Proviso by Finance (No.2) Act, 1998 w.e.f. 1.4 1999. As per this proviso, unexplained expenditure which is deemed to be the income of the assessee, shall not be allowed as a deduction under any head of income. Accordingly, if assessee has made unexplained investment and expenditure in construction of building in stock in trade, the expenditure will not be allowed. Therefore, the case laws relied by the appellant, no longer hold good. 4.5 However, on the quantum of valuation, I find that the Assessing Officer has not considered the objection of the appellant which has to be considered before arriving at the correct valuation a) The DVO has made the valuation as under: A. Cost of built up area for 9641 sq mts. Rs. 7,11,95,266/- B. Extra Items not included in plinth area Rate. Rs. 2,28,92,921/- Total Rs. 9,40,88,187/- Less:7.5% for self supervision & purchases Rs. 70,56,614/- Add 3% consultation charges for architecture.Rs.28,22,640/- Net Total Rs.6,98,54,219/- Out of this, the DVO has allocated the amount for A.Y.2005-06 & 2006-07 at Rs.3,39,09,206/- & Rs.5.59,45,013/- respectively. b) However, the DVO has himself staled that variation of 20%....
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....s u/s.145, there is no reason to add any amount on the presumption that the cost/investment in construction is low. Thus, without rejecting the books of account regularly maintained, the addition cannot be made only on the basis of the DVO's report which is also an interim report dated 13- 12-2007 was also not final. The DVO in his report has stated rates of various items viz., granite, floorings, ceramic tile, kitchen platform, acrylic bath tub, kota stone flooring etc. but did not mention any base for the rates he arrived at. The Ld. counsel further stated that the assessee has supplied the X-erox copies of bills of these items mentioning the rate to DVO and all these bills were also produced before DCIT which he has seen and verified but has no commented on the genuineness of these bills and no pointed out any material defects in these bills and hence not rejected the records maintained and produced by assessee. He further stated that the assessee had supplied the X-erox copies of bills of all the construction materials along with the working to arrive at the rate per sq.ft. to DVO and comparison chart of rates adopted by DVO arbitrarily without any basis and the actual rates of....
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....fic types of cases. These would be the cases wherein an estimate of the value of any investment referred to in Sec. 69 or 69B or the value of any bullion, jewellery or other valuable articles referred to in Sec.69A or 69B is required. There is no mention about Sec. 69C. In the present case, the Ld. counsel argued that the AO doubted about the expenditure incurred on the project and the assessee has shown the expenditure on the project as declared in the books of account. The Ld. counsel stated that for the purpose of getting himself satisfied about the purported unexplained expenditure under Sec. 69C of the Act, powers u/s. 142A cannot be invoked. 9. On the other hand, Ld. SR-DR, stated that the proceedings in the present case are pending as this is a search case and the assessment was framed u/s.153C of the Act. He stated that in earlier years also, those falling u/s.153C of the Act i.e. assessment years 2000-01 to 2005-06, the assessee's returns were called u/s.153C of the Act and the assessments were framed. Accordingly, he stated that the assessments were pending in the present case. As regards to the applicability of Sec.142A of the Act to Sec.69C of the Act, the Ld. SR-DR ....
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....ount but the Assessing Officer has not rejected or no defect was pointed out in the books of account regarding cost of construction of the project. We further find from the case records that even before verifying the books of account regularly maintained and without pointing out any defects in the books the cost of construction was referred to DVO. We are of the view, on the basis of evidences produced before us, that the assessee has regularly maintained books of account and various records along with supporting evidences of various raw materials like cement, steel, bricks, sand, wood, labour cost, sanitary wares etc. but the AO has not found out any defect in the books/records/bills etc. and has not rejected books of account. Without causing any defects in books regularly maintained and without rejecting the books u/s.145, of the Act there is no reason to add any amount on the presumption that the cost/investment in construction is low. Thus, without rejecting the books of account regularly maintained, the addition cannot be made only on the basis of the DVO's report. We further find that the assessee has supplied the X-erox copies of bills of these items mentioning the rate to D....
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....purpose for initiating reassessment. This view is clearly supported by the decision of Ahmedabad Bench in the case of Umiya Co-operative Housing Society Ld. v ITO (2005) 94 TTJ 392 (Ahd), wherein it is held as under:- "7. From the above, it is evident that s.142A empowers the AO to require the valuation officer for making the estimate of the value of any asset provided the AO, required the same for the purpose of making the assessment or reassessment. He above provision does not empower the AO to refer the matter to the DVO for gathering information for reopening of assessment. Making the reassessment and reopening of assessment are two different things. 8. When the process of reopening of assessment ends and the assessment is validly reopened thereafter the process of making reassessment starts. Therefore even after the insertion of s.142A, the AO should have reason to believe that any income chargeable to tax has escaped assessment as provided under s. 147 and thereafter only the notice for reassessment can be issued under s. 148. Even after the insertion of s.142A, there is no amendment in the language of s. 147. Therefore, the condition prescribed under s. 147 for reopeni....
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....u/s.148 in all three years under consideration was not in accordance with law. We, therefore quash the notices issued u/s.148 and consequently the assessments completed in pursuance to notices u/s. 148 are also quashed. Since the assessment itself has been quashed, the grounds raised by both the parties with regard to the merits of the additions for undisclosed investments in the house property need no adjudication at this stage because once the assessment is cancelled, the addition does not survived. a~y. Mr. Bhatt has mainly emphasized on Section 142A of the Act. He submits that the Assessing Officer at any time can make reference to the Valuation Officer for valuing the property for the purpose of assessment or reassessment, where the value of any investment referred to in Section 69 or Section 69B or Sections 69A & 69B is required to be made. Whether any income can be taxed by deeming the value of investment not disclosed, are issues where such types of questions arise while some proceedings are pending for assessment. In absence of such proceedings, the Assessing Officer cannot refer any property for valuation to Valuation Officer. In opening part of Section 142A the words use....
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....rein, then the addition on account of difference in cost of construction could not be made even if a report is obtained within he meaning of Sec.142A from the DVO. It is because the use of the report of the DVO obtained u/s.142A is not mandatory but is discretionary as the word used is 'may' therein. Accordingly, we are of the considered view hat in the present case when AO has not rejected the books of account by pointing out any defects reference to the DVO will not be valid and, therefore, DVO's report could not be utilized for framing assessment even if such a report is considered to be obtained u/s.142A. Since reference to DVO being held as invalid, the assessment/reassessment framed thereafter would also be invalid. Even otherwise, the issue of unexplained expenditure u/s.69C of the Act is not covered under the powers of Sec.142A of the Act and this issue is squarely covered in favour of the assessee and against the Revenue by the decision of Hon'ble Delhi High Court in the case of AAR PEE Apartments (P) Ltd. (supra). The Hon'ble Delhi High Court held as under:- "6. Before we advert to the interpretation to the aforesaid provision we deem it proper to reproduce the followi....
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....ssion on this aspect proceeds as under: 8. Sec. 142(A) is to the following effect:- "142A. For the purposes of making an assessment of reassessment under this Act, where an estimate of the value of any investment referred to in s 69 or s. 69B or the value of any bullion, jewellery or other valuable article referred to in s. 69A or s. 69B is required to be made, the AO may require the Valuation Officer to make an estimate of such value and report the same to him." 9. It is clear from the reading of sub-s.(1) of this provision that it enables the AO to get the valuation done from the Valuation Officer in certain specific types of cases. These would be the cases wherein an estimate of the value of any investment referred to in s. 69 or s. 69B or the value of any bullion, jewellery or other valuable articles referred to in s. 69A or 69B is required. There is no mention about s. 69C of the Act. As is clear from the above, s 69A deals with unexplained money. Sec. 69B likewise relates to the amount of investment etc. not fully disclosed in books of accounts. On the other hand, the provision relates to unexplained expenditure is in s. 69C. 10. In the present case the AO had dou....
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....xpenditure stipulated in s. 69C. No doubt the need behind inserting s. 142A was to empower the AO to make a reference to the Valuation Officer as there was no such specific powers and existing provision contained in s. 131 were inadequate. However, even this statement of object and reason clearly confined and limited the reference "to hold a scientific, technical and expert investigation etc." Learned counsel for the assessee has drawn our attention to CBDT circular issued by it explaining the Finance Bill, 2004 which specifically omits the word 'expenditure' as well as s. 69C. It is on this basis that the s. 142A was inserted in the form as it appears on the statute book now. If the intention was to include unexplained expenditure as contemplated in s. 69C of the Act as well this provision should have been specifically mentioned in s. 142A of the Act. 16. From the reading of sub-s.(1) of s. 142A, it is clear that the legislature referred to the provisions of ss. 69, 69A and 69B but specifically excluded 69C. The principle of casus omissus becomes applicable in a situation like this. What is not included by the legislature and rather specifically excluded, cannot be incorporated....