TaxTMI 
TaxTMI 
2017 (6) TMI 1147
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.... 308/Mds/2011 3. The facts of the case are that in the assessment orders for the assessment year 1995-96, 1996-97 and 1997-98, the cost of construction of property of the appellant at 1/240, East Coast Road, Injambakkam was taken at Rs. 82.29 lakhs and the cost of construction of apartment at Sholinganallur was taken at Rs. 117.45 lakhs, invested over a period of 3 years. (F.Y. 1994-95 to 1996-97). After considering the investment of Rs. 61.78 lakhs in Injambakkam property and Rs. 27 lakhs in Sholinganallur property returned by the appellant, the balance of Rs. 110.96 lakhs was treated as undisclosed investment in the properties, 1/3rd of this amount (RS.36,98,660/-) was treated as unexplained investment in each of the assessment years (A.Ys. 1995-96, 1996-97 & 1997-98) and addition on account of unexplained investment in construction was accordingly made for these assessment years. 4. Aggrieved by the additions, the appellant preferred appeals against the assessment orders before CIT(A). 5. The appeal for A.Y. 1997-98 was decided by the CIT(A)-II (Order dated 14.02.2003 in ITA No.60/2001-02) in which the total cost of construction was determined by the CIT(A) as below: ....
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.... further submitted as below: "with reference to the above, we have been requested to state that the property has been inspected by the DVO in 2000 and in no stretch of imagination it can be construed that the construction was over in 1995-96. The assessee has also filed submissions filed with the Commissioner of Income -tax (Appeals) on earlier representations. We may also invite your kind attention to our letter dated 23.08.2003, addressed to your predecessor. Taking all these into consideration, we submit that there is no basis for adding back any sum on account of the unaccounted cost of construction". 6. The A.O. determined the total cost of construction of injambakkam property at Rs. 80,00,000/- and Sholinganallur property at Rs. 1,00,00,000/- stating the following: "Assessee's submissions and submissions made before CIT(A) have been carefully considered. It is seen from the records that assessee constructed two buildings at No.2/1, B-3, Seashell Avenue, Sholinganallur, Chennai and at Green Point, No.18/4A, Injambakkam, Chennai. During the course of present proceedings assessee failed to furnish any documentary evidence and failed to refute the findings ma....
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.... Cost disclosed by assessee (Rs.) 1. Injambakkam Property 80,000/- 28,76,000/- 2. Sholinganallur Property 1,00,00,000/- 61,71,000/- 7.1 Since assessee has disclosed partial amount of the cost of construction of the above property, the CIT(A) directed the assessing officer to consider the balance amount as undisclosed investment for assessment year 1995-96 to 1997-98 at 1/3rd of undisclosed investment for each of these assessment years. Again this assessee is in appeal before us for all these three assessment years. 7.2 The learned AR submitted that in proper accounts have been maintained and complete details of construction have been furnished. The AO had not found any omission or discrepancy in the accounts or details filed and, hence, he has no jurisdiction to refer the matter to the Department Valuation Officer. 7.3 The cost of construction has been reflected in the books of accounts. All the bills and vouchers relating to the construction of both the properties are supported by proper vouchers and invoices and the same have been submitted to the AO, copy enclosed, which were never disputed. In the absence of any other evidence to the contrary....
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....ourt the following discrepancies in the Valuation Report of DVO: (a) Marbles have been valued at Rs. 36,84 Lakhs as against the actual of Rs. 4.63 Lakhs incurred by the appellant. (b) Internal water supply, sanitary and electrical installation has been assumed at Rs. 15.03 lakhs without any basis. He had purely done on an estimated percentage on civil cost without making any detailed study. (c) Cost of marbles, which was estimated by the DVO at Rs. 330 per square feet. was reduced to Rs. 250 per sq.ft. by CIT(A). The state PWD has estimated at Rs. 145 per sq.ft. All the above are only estimates and the variation is on account of the individual's estimate. (d) DVO has estimated the Architect fees at Rs. 2,42,426/-, as against the actual of Rs. 50,000/- only. (e) Deduction for self-supervision was allowed at 5% only and this should be allowed at 15%. 7.10 According to AR if the above factors are adjusted on a realistic basis to the valuation Officer's Report, the difference in the valuation and the cost incurred by the appellant will be negligible. He therefore, prayed that the additions totalling to Rs. 89,72,000/- (Rs.29,90,666/- for ....
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....ssees for drawal of money for the purpose of construction and also bills and vouchers pertaining to construction of these buildings." 10. Consequently, the assessment was framed by the assessing officer placing once again on the same DVO's report which was obtained by AO by exercising the power under Section 142A of the Income Tax Act. It would be appropriate to refer the provisions of Section 142A of the Act, which was inserted by the Finance (No.2), 2004, with effect from November 15, 1972, with effect from November 15, 1972, which reads thus: "142A. Estimate by Valuation Officer in certain cases.-(1) 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 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. (2) The Valuation Officer to whom a reference is made under sub-section (1) shall, for the purposes of dealing with such reference, have all the powers that....
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....ourt in Smt. Shashi Agarwal's case [2007] 210 CTR (All) 205 had held that where the Tribunal had passed the order before the cut-off date prescribed under the proviso to section 142A of the Act and the appeal under section 260A of the Act being maintainable before the High Court only on substantial question of law, therefore, it could not be said to be continuation of the assessment proceedings within the meaning of the proviso to section 142A of the Act. The Assessing Officer, thus, had no power to refer the matter to the DVO. 12. In the present case, originally the assessment was framed for the assessment year 1997-98 under Section 143 (3) vide assessment order dated 30.03.2000 by DCIT, Central Circle II(2), Chennai and later on CIT(A) passed the appellate order on 04.02.2003. Consequent to the appeal against this order, Tribunal passed the order in ITA No. 1159/2003 on 30.03.2004 for the assessment year 1997-98 and as read from the order of the Tribunal, it has given a specific finding that the Assessing officer shall make an independent enquiry and own appraisal regarding the cost of construction and consider the DVO Report as supportive document and not as primary mater....
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....rom non compliance of notice issued under Section 142(1). Accordingly, he confirmed the levy of penalty under Section 271(1)(b). Against the order, the assessee is in appeal before us. 16. The Learned AR submitted that the appellant had filed a return declaring an income of Rs. 16,800/- which was accepted under Section 143(1) and, later, u/s 143(3). Copies of the Return of Income and Orders u/s. 143(1)(a) and 143(3) are enclosed. 17. The following is the extract of the Assessment Order dated 28.03.2006 under Section 143(3). "The assessee did not file return of income voluntarily under Section 139(1) of the I.T.Act. Hence, Notice u/s 142(1) was issued calling for return of income on 23.01.2004. The assessee filed return of income on 09.02.2004 declaring NIL income. The return was processed u/s. 143(1)on 23.02.2004. Notice u/s 143(2) was issued on 14.06.2004, 7.12.2005 and 20.12.2005. Notices u/s 142(1) & 143(2) were issued on 3.1.2006 calling for certain information and explanations". 18. Therefore, according to him the A.O. was factually wrong in stating that the appellant filed "NIL" returns. Show Cause Notice dated 28.03.2006 for levy of penalty issued by the A.....