TaxTMI 
TaxTMI 
2014 (4) TMI 424
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....ng assessee due opportunity of being heard; 4. The CIT (A) ought to have considered the fact that investment of unaccounted income in construction of flats has been correctly brought to tax invoking the provisions of sec. 69C of the IT Act, 1961 ; 5. The CIT (Appeals) erred in law in granting relief to the assessee on the ground that Unexplained Expenditure under sec. 69C does not fall under the ambit of the provisions of sec. 142A for reference to DVO. In fact the properties were referred to the DVO for the purpose of valuation of unaccounted investments made by the assessee into those properties. Therefore, the reference made is valid in law; 6. Even if the reference to DVO is held to be bad in law, the information gathered with regard to valuation of properties can always be used as evidence for making assessment ; 7. The CIT(A) erred in not considering the fact that once the valuation report is held to be as not a basis for determination of cost of construction, the books of account maintained by the assessee gains significance and are to be treated as the basis for making an assessment; 8. The CIT (A) ought to have appreciated the action of the AO that the disallowance on....
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.... Section 69B is required to be made, the Assessing Officer may require the Valuation Officer to make an estimate of such value and report the same to him." 9. We find from the facts of the case that there was a survey u/s 133A of the Income Tax Act on 23-08-2006. During course of survey, it was found that there were certain cash payments towards construction material like sand, bricks etc and other items whose expenditure was not fully verifiable. The assessee has not maintained day to day stock registers. The quantification of labour payments was also not available. Since the expenditure incurred by the assessee was not fully supported by vouchers and proper evidence, the assessee offered additional income to the tune of Rs. 1.60 crores. In mean time the Assessing Officer made reference to the District Valuation Officer on 04-09-2006 and the DVO submitted the valuation report on 14-09-2009 as per which the cost of construction of the 22 properties was arrived at Rs. 55,83,05,733/-. The assessee has disclosed the cost of construction of these properties in its books at Rs. 38,58,53,602. The difference between these two was worked at Rs. 17,24,53,131/- which was spread over to 5 as....
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.... initiated, the word 'making' should be presumed to be associated with both 'assessment' or 'reassessment', the reference u/s. 142A of the Act can be made. When there is process of assessment, which is initiated after filing of the return of income or issuance of notice u/s. 142(1) and similarly, the process of reassessment could be initiated only after issuance of notice u/s. 148(1) after duly fulfilling the formalities mentioned therein, the reference u/s. 142A of the Act can be made. It clearly shows that the invoking of Sec. 142A is a process after the initiation of the assessment proceedings. Further, it is mentioned in this section that 'where estimate of the value of any investment referred to in Sec. 69 is required to be made. This also shows that a reference to DVO u/s. 142A can be made only when a requirement is felt by the AO for making such reference. Requirement would arise or could be felt only when there is some material with the AO to show that whatever estimate assessee has shown is not correct or not reliable. The use of word 'require' is not superfluous but signifies a definite meaning whereby some preliminary formation of mind by the AO is necessary which requir....
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....tive Housing Society Ltd. in Tax Appeals No. 1496 to 1498 of 2005 dated 12-07-2006, wherein it is held as under:- "The short controversy involved in these appeals whether the Assessing Officer can refer any matter for valuation of the property of an assessee though assessment and / or reassessment proceedings are not pending. The Tribunal is of the view that when the assessment proceedings are not pending the Assessing Officer has no jurisdiction and is not empowered to refer any property for valuation to the Valuation Officer. The Tribunal has discussed this issue as under: 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 section 142A, the Assessing Officer should have reason to believe 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. Even after the insertion of section 142A there is no amendment in the language of section 147. Therefore, the condition prescribed u/s. 147 for reopening of assessment still exists. The Hon'ble Gauhati High Court in....
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....sment proceedings of the assessee is pending before him, we see no justification to make any addition in such cases." Even the Hon'ble Apex Court has also dismissed the SLP of the Revenue in this case and affirmed the judgment of Hon'ble High Court in SLP No. CC 187 of 2007 dated 07-03-2007. As the issue in these appeals of the present assessee before us is exactly identical, what was before the Hon'ble High Court in the case of Umiya Cooperative Housing Society Ltd.(supra), respectfully following the same, we are of the considered opinion that the reference u/s. 142A of the Act can be made only when the proceedings under this Act is pending and not otherwise. Accordingly, this legal issue, we decide in favour of the assessee and against the Revenue". 12. We further find from the case records that even if a reference u/s. 142A is made by the Assessing Officer on certain consideration such as anything find during the course of survey u/s 133A of the Act or on the basis of a tax evasion petition or a reference is required to be made during the course of other proceedings or a report of the DVO is available to the AO before making an assessment or reassessment then same can be utili....
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....n under s. 142A, a reference can be made for assessment or reassessment where an estimate of value of any investment referred to in s. 69 or s. 69B or the value of any bullion, jewellery or other valuable articles referred in s. 69A or 69B is required to be made. The AO may require the Valuation Officer to make an estimate of such value and report under s. 142A(1), for the purpose of making as assessment under Act, where an estimate of the value of any investment referred to in s. 69A 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 Assessing Officer may require the Valuation Officer to make an estimate of such value and report the same to him. Thus the power available under s. 142(1) is requiring the Valuation Officer to value any investment or bullion, jewellery or other valuable article referred in s. 69, s 69A or s. 69B of the Act,. These powers do not extend to estimate the amount of unexplained expenditure referred in s. 69C of the Act. Admittedly, in the present case the expenditure on construction are claimed and allowed as revenue expenditure and cannot be considered as an investment or b....
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....s. 12. Her submission was that the expenditure" incurred should be considered as coming within the expression 'investment'. 13. We cannot agree with this submission of learned counsel for Revenue. If investments could include within its fold he expenditure as well which is incurred by a businessman during the course of his business, there was no necessity of having a separate provision under s. 69C of the Act which deals with unexplained 'expenditure' and reads as under: "69C. Where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the opinion of the AO satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year." 14. The scope and ambit of ss. 69B and 69C are altogether different. The connotation to the investment appearing in s. 69B has to be in the context of investments made in some property or any other type of investment and it could not be the business expenditure. The word 'investment' contained in s. 69B deals with investm....