TaxTMI 
TaxTMI 
2014 (9) TMI 496
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....on towards undisclosed investment in hospital building 15,00,000 2. Addition towards depreciation on fixed assets 2,28,816 3. Addition towards unexplained addition in capital 7,26,185 4. Addition towards unsecured loan in the name of her father 3,30,000 5. Addition towards undisclosed receipts 99,405 6. Addition towards expenses 1,44,930 3. The facts are that the assessee is a gynaecologist and running a hospital by name Vikram Hospitals. A survey u/s. 133A of the Act was conducted on 27.09.2005. During the course of survey a statement of assessee was recorded wherein she stated that she did not have any knowledge about the books of account or registers of the hospital. Further, she also stated that she had no control over the financial affairs of the hospital which was looked after by her husband and her father. The husband of the assessee made a statement that the books have been lost and only a ledger extract of the construction account for FY 2002-03 was available and beyond that no details of construction account were available. The assessee had submitted that the construction of Vikram Hospitals in Madhapur was started during....
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....ruction of the hospital building in its balance sheet at Rs. 63,99,186/- only. Hence, the difference of Rs. 16,46,464/- (Rs. 80,45,650/- Rs. 63,99,186/-) is liable to be treated as undisclosed investment made in the said building. However, considering the fact that the construction was done under the personal supervision of assessee's husband, some credit is given to the assessee and the addition on account of undisclosed investment in the construction of the building is restricted to Rs. 15 lakhs. Accordingly, an addition of Rs. 15,00,000/- is made to the total income of the assessee on account of undisclosed investment in the hospital building for which penalty proceedings u/s 271(1)( c) of the 1. T. Act are separately initiated." 5. Aggrieved, the assessee preferred an appeal before the CIT(A). 6. The assessee argued before the CIT(A) that the Assessing Officer had arbitrarily rejected the valuation done by the assessee and the Assessing Officer has not found any mistake in the valuation report of the valuer consulted by the assessee. The CIT(A) vide letter dated 12.2.2008 referred the case to the Assessing Officer for a Remand Report to be submitted after getting the ....
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....1.2004. Accordingly, the Assessing Officer added the above amount. 10. During the appellate proceedings before the CIT(A), the assessee did not elaborate on this issue and only stated that the father of the assessee had sources to provide the loans. The assessee has argued that on various occasions her father had been withdrawing cash from his bank account totalling to Rs. 2.25 lakhs in the last two years. It is stated that all these withdrawals were deposited back in the bank to give the loan. The CIT(A) held that the explanation of the father of the assessee cannot be relied upon as he stated that this cash had been kept with some relative and has been returned back and the CIT(A) pointed out that no details have been provided and absolutely no evidence has been provided regarding this story. The CIT(A) agreed with the Assessing Officer that the father of the assessee does not have any other source of income and this amount of so called withdrawals had definitely been used for the purpose of his personal household expenses over nearly two years. Thus the CIT(A) held that the fact is further proven by the conclusive evidence wherein just before issue of cheque an amount of Rs. ....
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....s made by the AO towards estimated understatement of cost of construction of the hospital and enhancing the cost of construction by Rs. 1,63,54,350 based on the report of the District Valuation Officer (DVO) is erroneous and is liable to be deleted. (ii) The learned CIT (Appeals) has no jurisdiction to travel beyond his jurisdiction, which he did while calling for a report of the DVO. (iii) The learned CIT (Appeals) erred in admitting fresh evidence in appeal from the Revenue whereas only the appellant is entitled to furnish fresh evidence in the appellate proceedings in terms of Rule 46A of the Income Tax Rules, 1962. Addition made pursuant to such fresh evidence is legally not sustainable. (iv) The learned CIT (Appeals) erred in directing the Assessing Officer to make a reference to the Valuation Officer while calling for a remand report, which in law he is not entitled to do. The addition sustained and enhancement made to the cost of construction based on the DVO's report is bad in law. (v) The learned CIT (Appeals) overlooked the fact that only the AO could make a reference to the Valuation Officer in terms of section 142A of the JT Act and that too for the purp....
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....unded by the department after survey, which even now are in the custody of the department. (vi) The learned CIT (Appeals) failed to notice that the rates adopted were not prevalent during the years of construction or in some respects even today, i.e. after almost a decade. (vii) Tile learned CIT (Appeals) ought to have seen that the valuation report assumed construction of the hospital from the years 2002 to 2008 whereas the construction relevant for the Assessment Year under consideration was completed in early 2004 itself, consequent to which the valuation report is erroneous and the cost arrived at is arbitrary unreason able and highly excessive. (viii) The learned CIT (Appeals) erred in not realising that the cost arrived at by the DVO included. The cost of water softener, diesel generator set, air conditioning and the lift aggregating to Rs. 25,80,000. A sum of Rs. 24,67,271 was separately incurred by the appellant towards the aforesaid items and this cost was in addition to the cost construction admitted. Consequently, the cost of construction in the DVO's report was excessive by Rs. 25,80,000 on this count alone (ix) The learned CIT (Appeals) deducted the cos....
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....port obtained after completion of the assessment was valid in law. 15. The AR submitted that as follows: As per sec. 142A, reference to the Valuation Officer can be made for the purpose of assessment or re-assessment, that too when the AO is required to make an addition u/s 69. Addition u/s 69 can be made on account of undisclosed investment. Thus, the pre-requisites u/s 142A are two fold: (i) the assessment or re-assessment is pending and (ii) that there is undisclosed investment and for the purpose of estimating the same, Valuer's report may be obtained. If an assessment is already completed, the AO has no jurisdiction to make reference u/s 142A. Likewise, if the AO has not arrived at a finding that there is undisclosed investment, section 69 cannot be invoked in which case reference u/s 142A is automatically ruled out. 16. The AR stated that in the case of the assessee, the AO had concluded the issue by making a detailed discussion before arriving at addition of Rs. 15 lakhs as undisclosed investment u/s 69. Further the AO referred to a few comparable cases and the AO consulted SE (Valuation). It was submitted that when the assessee preferred an appeal against this add....
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....closed in the books of account and once this condition is satisfied, the quantum of such investment made can be ascertained by the Assessing Officer by making a reference under section 142A in order to make the addition under section 69 or 69B, whichever is applicable ... A perusal of the assessment order, however, shows that there was no reference whatsoever made by the Assessing Officer to any material/evidence/ information on the basis of which it could be said that the said consideration shown by the assessee was understated and that anything above what was disclosed by the assessee had actually been paid as consideration. The condition precedent for making a reference to the DVO by invoking the provisions of section 142A thus was not satisfied in the present case and neither the said reference nor the addition made on the basis of report obtained from the DVO in response to the said reference, in our opinion, was sustainable in law as rightly held by the learned Commissioner of Income-tax (Appeals). In the case of Subhash Chand Chopra v. Asst. CIT [2005) 92 TTJ 1087, this Bench of the Tribunal has held that no material or evidence having been recovered during the course of ....
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....nt 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 article referred to in s. 69A or 69B is required to be made. The AO may require the DVO to make an estimate of such value and report the same to him. In the instant case, there is nothing to suggest that any incriminating document was found and seized during the course of search or survey on 26-4- 2007 in the premises of the aforesaid group ... A mere glance at the assessment order reveals that there is no reference to any material/ evidence/ information on the basis of which it could be said that the cost of construction shown by the assessee was understated or anything above what was disclosed by the assessee. In terms of sec. 142A of the Act, reference to the DVO can be made only when a requirement would arise or could be felt when there is some material with the AO for making such reference and such requirement would arise or could be felt only when there is some material with the AO to show that whatever estimate the assessee has shown is not correct or not reliable. The use of the word 'require' is not superfluous but signifies a defi....
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....de. The Tribunal was wholly in error not only in entertaining the plea that was raised by the assessee which had persuaded the Commissioner to direct the Assessing Officer to refer the matter to the valuation cell, but in further proceeding to hold that the Commissioner did not have the power to do so. (para 11) In view of the above, the Tribunal is right in law in holding that referring the matter to the Valuation Officer under Section 16A, was a discretion given by the statute to the Assessing Officer only and hence the Commissioner (Appeals) could not direct the Assessing Officer to redetermine the value of the property after referring the matter to the valuation cell?" 18. We have heard both the parties. Section 142A is as under: (i) For the purposes of making an assessment or reassessment under this Act, where an estimate of the value of any investment referred to in section 69 or section 69B or the value of any bullion, jewellery or other valuable article referred to in section 69A or section 69B [or fair market value of any property referred to in sub-section (2) of section 56] is required to be made, the Assessing Officer may require the Valuation Officer to make a....
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....CIT(A) has clearly overstepped his jurisdiction and hence the order of enhancement by the CIT(A) has no legal sanction and is, therefore, deleted. This issue is decided in favour of the assessee. 23. With respect to the determination by the AO as undisclosed investment of Rs. 15 lakhs which was added to the construction cost of the hospital building, facts are as follows. The assessee filed a valuation report dated 17-12-2006 from an approved valuer who estimated the cost of construction of the hospital building at Rs. 59,66,000. The AO examined the cost of construction of the hospital. She noted that the plinth area of the property was 19807 sq. ft. In para 3.4, the AO noted that bills/vouchers impounded during the survey were verified with the ledger account of building construction account and observed that out of Rs. 56,58,839 claimed as cost in building a/c, the assessee was unable to produce bills/vouchers for Rs. 23,45,667. The AO noted that the cost of construction as per the assessee worked out to Rs. 286 per s. ft. whereas as per the approved valuer's report it was Rs. 301 per s. ft. In para 3.5 of the assessment order, the AO observed that the cost shown by the as....
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....In the course of scrutiny, the assessee surrendered a sum of Rs. 6 lakhs and offered the same for assessment. Out of the balance amount of Rs. 2,26,185, the Assessing Officer allowed Rs. 1 lakh as representing assessee's savings and the amount given by her husband and the balance of Rs. 1,26,185 was added back. 26. Before the CIT(A), a copy of account of assessee's husband was submitted as per which he made payments on her behalf to Margadarsi Chit fund, etc., which was transferred by a journal entry. The CIT(A) held that the assessee had given the same explanation in the assessment proceedings which was not satisfactory and confirmed the addition of Rs. 1.26 lakhs. The learned counsel stated that the Revenue authorities cannot expect the source of source to be established. 27. We have heard both the parties. Identity of the creditor, the creditworthiness of the creditor and genuineness of the transaction are proved by the assessee and hence the assessee has discharged her onus. Relying on the decision of the jurisdictional High Court in the case of R.B. Mittal (243 ITR 283) we are of the opinion that this addition is to be deleted as the assessee had satisfactorily p....
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....) erred in confirming disallowance of depreciation of Rs. 2,25,000 on various assets. vi) The learned CIT (Appeals) erred in confirming disallowance of hospital maintenance expenses of Rs. 2,20,000, other expenses of Rs. 70,000 and benefits paid to staff amounting to Rs. 1,00,000. 32. Ground No. 1 is general in nature and ground Nos. 5 and 6 have not been pressed by the assessee. Accordingly, these grounds are dismissed. 33. Ground No. 2 is with respect to the addition of Rs. 3.20 lakhs. The assessee has received this amount by cheque from her father. The CIT(A) confirmed the order of the Assessing Officer in holding that the transaction is not genuine. On appeal, it was submitted before us that the identity and creditworthiness of the creditor and genuineness of the credit were proved. Further it was submitted that the assessee had admitted in a sworn statement at the time of survey that her husband and her father are looking after the financial matters. 34. We find that her father Sri Vara Prasada Rao has filed a confirmation letter before the Assessing Officer. It has been stated by him that he has retired as Dy. General Manager from Power Grid Corporation in June 20....