TaxTMI 
TaxTMI 
2014 (1) TMI 1438
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....itary issue relates to the addition made by the Assessing Officer on account of unexplained investment made in the cost of construction of the Hospital Building by invoking Section 69B of the Act. The facts giving rise to the impugned dispute are common in all the years, which can be summarized as follows. In the assessment year 2001-02, the Assessing Officer noticed that assessee had shown an expense of Rs.22,29,883/- towards cost of construction of a Hospital Building which still under construction. The Assessing Officer made a reference to the Departmental Valuation Officer (in short "the DVO") for estimating the cost of construction. The DVO estimated the cost of construction at Rs.1,02,00,000/- as against the value declared by the asse....
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..... 15.11.1972 and the CIT(A) was directed to re-examine the issue on merits of the case. The impugned order has been passed by the CIT(A) following the directions of the Tribunal. 4. The first issue raised before us is to the effect that the assessee was maintaining books of account in respect of the cost of construction of the Hospital Building and the same were also examined by the Assessing Officer during the assessment proceedings. It is pointed out that such books of account have not been rejected and therefore the matter could not be referred to the DVO for assessing the cost of construction. In the absence of the rejection of the books of account, the reference to the DVO was not justified and in support reliance was placed in the ju....
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....alf in the books of account maintained by the assessee .........". The aforesaid words appearing in Section 69B of the Act imply that before making an addition under this section, Assessing Officer was required to reach a positive finding that the assessee has spent an amount on cost of construction which is more than the amount recorded in the books of account. Ostensibly, the only basis brought out by the Assessing Officer to make the impugned addition under Section 69B of the Act is the report of the DVO estimating the value of construction at higher figure. The report of the DVO is at best, an estimate but not an evidence to prove any undisclosed investment in construction by the assessee, especially in a situation where no infirmity or....
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....as justified the reference to the DVO for estimation of the cost of construction of the Hospital Building. In our considered opinion, the material on record does not show what was the nature of "local enquiries" and what was the material gathered which could show any infirmity/discrepancy in the cost of construction declared by the assessee in the account books maintained. Therefore, considering the entire discussion in the assessment order, we find that the Assessing Officer could not have referred the matter to the DVO because the books of account were not rejected, following the parity of reasoning laid down by the Hon'ble Supreme Court in the case of Sargam Cinema (supra). 8. Before us, it has been emphasized that in para 3 of the asse....
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.... income and thereafter made certain additions and computed the finally assessed income. We are only trying to point out that even at the time of determining the total income the Assessing Officer was far from rejecting the books of account. Therefore, considering the entire discussion in the assessment order, it is not a case where by implication it can be inferred that the Assessing Officer invoked his power under Section 145 of the Act and rejected the books of account. Therefore, in our view, in the present case, the Assessing Officer could not have made the reference to the DVO for estimating the cost of construction without first rejecting the books of account, as laid down by the Hon'ble Supreme Court in the case of Sargam Cinema (sup....