TaxTMI 
TaxTMI 
TaxTMI 
2019 (5) TMI 1537
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....the assessment records, it was seen that while completing the assessment the Assessing Officer omitted to look into the following issue: During the period 2006-07 to 2013-14, the assessee had constructed a building called 'Capital City' which was referred to the DVO for valuation. The valuation report was received on 03/04/2014. As per the DVO's report the cost of the building was Rs. 9,85,39,000 as against the value adopted by the assessee of Rs. 6,11,60,510/-. There was a difference of Rs. 3.74 crores between the value declared by the assessee and the report of the DVO. The proportionate unaccounted expenditure for AY 2013-14 was Rs. 33,63,288/-. This issue was not considered while completing the assessment. Hence, the CIT held that the assessment order dated 10/03/2016 was erroneous in so far as it was prejudicial to the interests of the Revenue. Accordingly, he invoked the provisions of section 263 of the Act. 3. Against this the assessee is in appeal before us. The Ld. AR submitted that the assessee is a partnership firm engaged in the business of real estate and construction work. The CIT passed order u/s. 263 of the Act whereby the assessment was set aside and a fresh....
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....ssment years 2008- 09 to 2014-15. The assessments for A.Y. 2008-09 to 2012-13 without considering the DVO report had rendered the assessments erroneous and prejudicial to the interests of the revenue, thereby invoking the provisions of section 263 by the CIT vide order dated 04/03/2016. The details of the assessment years and amounts invested as declared by the assessee and as per the DVO report is as follows: Financial Year Cost of Construction declared by the Assessee/Appellant Proportionate of total cost declared by the Appellant Proportionate Cost as per DVO Difference in cost between the DVO and the Appellant 2006-07 78,677 0 0 0 2007-08 1,18,72,387 19.55 19264375 7313311 2008-09 1,03,01,925 16.84 16593967 6292042 2009-10 70,21,086 11.48 11312277 4291191 2010-11 1,23,14,410 2013 19835901 7521761 2011-12 1,05,39,899 17.23 16978270 6438371 2012-13 55,05,222 9.00 8868510 3363288 201 '3-14 35,27,174 100 98539000 37378490 3.3 It was submitted that the CIT(A), Kochi vide order dated 07/05/2015 deleted the additions proposed by the Assessing Officer. It was submitted that the CIT(A) vide order dated ....
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....e to justify that when the books of account in respect of cost of construction have been maintained by the assesses and the same were not rejected, how the matter could be referred to the DVO for assessing the value. Wherever the books of account are maintained with respect to the cost of construction, the matter can be referred to the DVO after the hooks of account are rejected by the revenue on some legal or justified basis. In the absence of the same, the reference to the DVO cannot be upheld. In view of the above, we do not find any substance in the appeal. No question of law arises in this appeal for consideration of this Court. Dismissed." 3.4 In the case of Dr. Raghuyendra Singh v. C1T [2014] 49 taxmann.com 544/12015] 229 Taxman 554 (Punj. & Har.) the provisions of Section 142A of the Act were taken into consideration, including the Circular No.5 of 2005, issued by the Central Board of Direct Taxes, to come to a similar conclusion that without rejecting the books of account, the matter should not be referred to the DVO. Relevant observation reads as under: "Section 142A of the Act has been incorporated primarily for verification of the value of any investment in respect....
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....9 Taxmann.com 182 3.5 It was also submitted that the reference to the report of DYO cannot be made sans recording any finding that the books of accounts maintained by the assessee are not genuine or lacks credibility either by the CIT or by any authority till date. This has been affirmed in the following judgments: > Madras High Court in the case of KK Seshaiyer (2001) 166 CTR 527 > Rajasthan High Court in the case of CIT Vs Hotel Joshi (2000) 242 ITR 478; 3.6 It was submitted that the Assessing Officer had grossly erred in relying on the decision laid down in the case of Messrs Indira Hospital Research and Diagnostic Centre Vs ACIT (2012) 208 Taxman 12 (Karnataka). The ratio laid down in the said case mandates that any reference to the DVO and subsequent additions to the total income based on the DVO report can only be made if the Assessing Officer frames and opinion that the books of accounts maintained by the assessee are unreliable. On the contrary, no doubt has been expressed by the learned Assessing Officer. Further, the books of accounts of the Appellant have also been accepted by the Department and confirmed by this Tribunal. 3.7 It was submitted that the AO had....
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....d is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent-if the order of the Income-tax Officer is erroneous but is not prejudicial to the or if it is not erroneous but is prejudicial to the Revenue-recourse cannot be had to section 263(1) of the Act. The provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase "prejudicial to the interests of the Revenue" is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is not confined to loss of tax. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue. If due to an erroneous order of the Income-tax Officer, the Revenue is losing tax lawfully payable by a person, it w....
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....ibunal as well as the Commissioner of Income Tax (Appeals) had concluded, on facts, that there was no material found during the search to justify the reference to the DVO for his valuation of the said properties. The Tribunal held that there must be some material to show that the investment made by the assessee was outside the books o. This, according to the Tribunal, was a condition precedent for making a reference to the DVO. The Tribunal also held that, in any event, the DVO's report was based on incomparable sales and, therefore, could not be relied upon. The Tribunal also held that the burden was on the revenue to show that the real investment in the said properties was greater than the apparent investment, as disclosed by the respondent assessee. The Tribunal held on facts, that the said burden had not been discharged by the revenue. Consequently, the Tribunal held in favour of the assessee and against the revenue and found that the reference to the DVO itself was not in accordance with law. Furthermore, it was submitted that the Income Tax Appellate Tribunal, Mumbai in M/s. Ideal Appliances Co. Pvt. Ltd. vs. DCIT dated 31.12.2015 reiterated the above mentioned legal positi....
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....e, would mitigate against well known canons of strict construction of statutes. A similar view was also upheld in Prakash Chand Vs Deputy Commissioner of Income-tax (2004) 269 1TR 260. It was submitted that the ITAT, Kolkata in Machinery Agencies (India) v. Deputy Commissioner of Income Tax in [2012] 27 taxmann.com 168 (Kolkata-Trib) held that if the DVO report, which was received subsequent to the assessment order, was to be accepted, then the concept of finality of assessment will have to be buried deep and time limit for framing the assessments will have to be ignored all together. The scheme of the Income Tax Act, does not visualise unfettered discretions being conferred upon the Commissioners to tinker with the completed assessments. A similar view was upheld in the case of ACIT Vs Navalkishor Guruprasad Jaiswal and Others (ITA Nos. 274,275/Nag/2013 and 274/Nag/2014) The Ld. AR also relied on the decision of the ITAT, Hyderabad Bench in the case of M/s. Legend Estates Pvt. Ltd. vs. DCIT (ITA No. 1542/Hyd/2010 wherei it was held as follows: "It is a clear cut case that the assessee has produced the books of account but the Assessing Officer has not rejected or no defect was ....
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....ering the objections of the assessee. The assessee submitted that the DVO report was never a part of the record during the finalization of the assessment proceedings and is a document which has been received at a much later time (much after the time limit prescribed for completion of assessment). 3.9.6 It was submitted that by directing the Assessing Officer to consider the DVO report (which was received much after the finalization of the assessment, i.e., 03.04.2014), the Assessing Officer had reopened a finalized assessment and the same would be without considering the objections of the assessee to the findings of the DVO. 3.9.7 It was further submitted that as per Sub-clause (c) Section 263 of the Act, if the order passed by the Assessing Officer has been the subject matter of any appeal filed, the powers of the Principal Commissioner shall extend only to such matters as had not been considered and decided in such appeal. As mentioned above, the DVO's report and the books of accounts of the assessee had already been the subject matter of an appeal. It was submitted that the CIT(A) in the assessee's own case deleted all the additions made by the assessing officer based on....
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.... Sunita Mansingha [2017] 80 Taxmann.com 258. In addition, the assesses have consistently reiterated that the DVO's report suffers from the following grave factual infirmities: * The building has foundation in column footing and not raft footing. In raft footing the entire coverage of the building will be thick RCC slab whereas in column footing it is only columns erected on footings underneath each column and not on the entire coverage of the building. Mistakenly the DVO has adopted the value for raft foundation and rate adopted is CPWD rate. For raft foundation the quality of material will be much more than what is required for the foundation in column footing. The average value adopted for the framed structure/ sq. mtr. by the DVO is more than Rs. 10,750/- where as the amount actually spent by us is Rs. 2,86,78,056/- which works at to Rs. 5035/-/Sq. Mtr. * In the case of Tile flooring, the DVO has adopted nearly Rs. 100/- as the value per sq. ft. where as the cost of the vitrified tiles used is only Rs. 40/- sq.ft plus Rs. 8/- sq. ft as laying charges and Rs. 14/- per sq. ft towards cement, sand etc. (total Rs. 62/- per Sq.Ft). Even today the cost of 600mm x 600mm vitri....
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....ee had paid architectural fee only for the drawings and supervisions were conducted by supervisors of the assessee. 3.9.9 The Ld. AR submitted that it is a trite position of law, crystallized by various Courts/Tribunals, that when the Assessing Officer has no cogent material available to satisfy himself about the requirement of Section 69, no reference to the DVO can be made under Section 142A of the Act. The Ld. AR relied on the judgment of the High Court of Gujarat in Anand Banwarilal Adhukia vs. DCIT reported in [2016] 75 taxmann.com 301 wherein it was held as follows: "The other relevant provision which is required to be considered is section 69 of Act pertains to unexplained investment, whereas section 69A pertains to unexplained money etc not fully disclosed in books of accounts and therefore, these statutory provisions are related to a case where assessee had made certain investment or expenditure or is found to be the owner of any bullion, related to a case where assessee had made certain investment or expenditure or is found to be the owner of any bullion, jewellery etc and the same are not properly recorded in the books of account. The court in a decision of ME and M....
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....cular case, the issue was dealt with of section 142A of the Act." 3.12 It was submitted that the Assessing Officer erred in contending that the DVO has expertise in the valuation of buildings failing to appreciate that the report of the DVO being a mere estimate, cannot take precedence over the actual facts and valuation is an estimate and therefore, cannot be given precedence over real facts unless the real figures are defective. According to the ld. AR, this position was reiterated by various courts including the Supreme Court in the case of Daulatram Rawatmull (1964) 53 ITR 574 (SC). Reliance was also placed on Dr. S.V. Krishna Reddy vs. Dy. CIT (514-516/HYD/2009} and M/s. Legend Estates Pvt. Ltd. vs. Dy. CIT [I.T.A. No. 1542/Hyd/2010] in this regard. Thus, it was prayed that the order of the CIT dated 15/03/2018 may be quashed and set aside for all the assessment years. 4. On the other hand, the Ld. DR relied on the orders of the CIT passed u/s. 263 of the Act and submitted that the Assessing Officer received the DVO report before passing the assessment order. However, the Assessing Officer failed to consider the same. Hence, the CIT invoked the provisions of sec. 263 of th....
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....pex Court has categorically concluded that there no power to Assessing Officer for making reference to DVO for valuation of investments for assessment purpose 5.2 Finance (No.2) Act, 2004 has inserted Section 142A as a new section, with retrospective effect from 19th November 1972 to neutralise the decision of the Supreme Court in Amiya Bala Paul v CIT (supra). As per section 142A, as introduced by Finance (No.2) Act, 2004 the Assessing Officer can refer to Valuation Officer to make an estimate of value of any investment referred to in Section 69 or Section 69B. Therefore, section 142A has given power to AO to refer to the DVO for the purpose of estimating value of any investment for making assessment subject to certain conditions. 5.3 Even after insertion of section 142A of the I.T. Act, there are number of judicial pronouncements holding that the reference to DVO under section 142A of the I.T. Act is possible only upon finding that the books of accounts maintained by the assessee is not correct and the value estimated by the Assessing Officer varies substantially from what is recorded in the books of accounts. The various judicial pronouncements confirms that the process of e....
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....s of accounts are not reliable. Accordingly the Assessing Officer would first be required to reject the books of accounts before making a reference to the valuation officer. The rejection of books of accounts should precede the reference to the Valuation Officer". 5.4 Section 142A of the I.T. Act was substituted vide Finance (No.2) Act, 2014 w.e.f 1.10.2014. As per the said substitution the reference to section 69, 69B etc .... had been removed and it has made as a general provision stating that Assessing Officer can refer to DVO to estimate the value of any asset, property or investment for the purpose of assessment. The sub section (2) of 142A of the I.T. Act states that the Assessing Officer may make a reference to DVO whether or not he is satisfied about correctness or completeness of the accounts of the assessee. The ITAT Delhi Bench in the case of Westland Buildtech (P) Ltd. v. ITO Ward-18 (3), New Delhi (2016) 76 Taxman.com 142 (Delhi - Trib.) had occasion to consider the amendment to section 142A of the I.T. Act by the Finance Act, 2014. The finding of the Delhi Bench of the Tribunal reads as follows: "It is relevant to note that sub-section (2) of section 142A as inse....
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.... at the relevant time under consideration, before making reference to DVO the Assessing Officer was required to reject the books of accounts." 5.7 The Agra Bench of the Tribunal in the case of Sanjeev Parashar Aligra v. ITO [ITA No.230/Agra/2016 - order dated 07.12.2017), after referring to the judgment of the Gujarat High Court in the case of Goodluck Automobiles (P) Ltd. v. ACIT (supra) and the judgment of the Supreme Court in the case of Sargam Cinema (supra), held that the reference made by the Assessing Officer under section 142A of the I.T. Act without rejection of books of account is invalid. It is further held by the Tribunal that "there is no merit in the Department's content that extent of section 142A is applicable retrospectively. The section has specifically being made applicable by legislature itself w.e.f. 01.10.2014 and so it cannot be said to operate retrospectively". 5.8. The judgment of the Apex Court in the case of CIT v. Sunita Mansingha [(2017) 393 ITR 121 (SC)] will not apply to the facts of the present case. The Apex Court in the case of Sunita Mansingha (supra) was interpreting proviso to section 142A(3) of the I.T. Act (which was in existence from the ....
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....countant, Shri S. Sivaramakrishnan aged 70, S/o. S. Subramania Iyer, residing at 'Lakshmi', XXXV/1256, Pazhayanadakkavu, Thrissur-680 001. Partner, M/s. Vasu & Sivaram, Chartered Accountants, 10th Floor, Capital City, Korapath Lane, Thrissur-680 020. Later, the assessee changed the chartered accountant by a new person. Hence, there was a delay in filing the appeals before the Tribunal. To this effect, the Chartered Accountant, Shri S. Sivaramakrishnan has filed an affidavit stating the above change which reads as follows: "1. I. V.Parameswaran, S/o. R.Vasu Iyer, aged 69 years, residing at "Sivasakthi", Thottekkat Lane, Punkunnam P O, Thrissur - 680002._ being the Partner of the Applicant firm, M/s Ardra Associates, in the above case state that I know the facts of the case. 2. It is humbly submitted that this Condonation for delay application is before this Hon'ble Income Tax Appellate Tribunal in Appeal preferred against the impugned Order No. C.No. 23(84)/Tech/CIT(C) 15-16/817 dated 04.03.2016 for the Assessment Year 2008-09 passed by the Principal Commissioner of Income Tax (Central), Cochin received by the Applicant on 07.03.2016 and with an Appeal for the restoration ....
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....tion for delay 0f 201 days in appearing before this Hon'ble Tribunal for justice and equity. It is a trite position of law, crystallized by the Hon'ble Supreme Court of India in Collector, land acquisition anantnag and another verus Mst. Katiji and others, reported in 1987 (28) E.L.T. 185 S.C.) that refusal to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this when delay is condoned the highest that can happen is that a cause would be decided on merits after hearing the parties. Furthermore the Hon'ble Supreme Court of India in Esha Bhattacharjee v. Managing Committee of Rash unathpur Academy & Ors. Reported in (2013) 12 SCC 649 was pleased to reiterate the principles relating to condonation of delay by a court. The Hon'ble Court was pleased to sum the principles up as follows: "The principles for dealing with application for condonation of delay are as follows: (i) There should be a liberal, pragmatic, justice-oriented, non-pedantic approach while dealing with an application for condonation of delay, for the courts are not supposed to legalise injustice but are obliged to remove....
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....are that the while completing the assessment for AY 2008-09, reference was made to Dist. Valuation Officer, for ascertaining the cost of construction of one of the properties of the assessee, namely Capital City. The report was received after the completion of assessment. The valuation report has not been considered. The difference in valuation for AY 2008-09 is as under: Cost disclosed as per assessment (Rs.) Proportion of total cost declared by the assessee (%) Proportionate cost as per DVO (Rs.) Difference in cost between assessee and DVO (Rs.) 1,18,72,387 19.55 1,92,64,375 73,91,988 In view of the above, the CIT was of the opinion that the order u/s. 143)(3) r.w.s. 153A passed by the Assessing Officer dated 28/03/2014 is prima facie erroneous in so far as it is prejudicial to the interest of the revenue. Before the CIT, the assessee submitted that there were various anomalies on the part of the DVO in making assumptions and the rate and assumptions made by the Assessing Officer was on very high side. The CIT observed that the DVO's report was received after the completion of the assessment and nonconsideration of valuation report rendered the assessment er....
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....in cost between assessee and DVO (Rs.) 1,23,14,140 20.13 1,98,35,901 75,21 ',761 The CIT observed that non-consideration of valuation report rendered the assessment erroneous in so far as it is prejudicial to the interest of the Revenue. Hence, the CIT by exercising power u/s. 263 of the Act, remitted the issue to the Assessing Officer to conduct necessary inquiries/verifications and passing consequential orders, after giving the assessee opportunity of being heard. 7.4 For the assessment year 2012-13, the CIT observed that there was difference in valuation for ascertaining the cost of construction of one of the properties of the assessee as under: Cost disclosed as per assessment (Rs.) Proportion of total cost declared by the assessee (%) Proportionate cost as per DVO (Rs.) Difference in cost between assessee and DVO (Rs.) 1,05,39,899 17.23 1,69,78,270 64,38,371 The CIT observed that non-consideration of valuation report rendered the assessment erroneous in so far as it is prejudicial to the interest of the Revenue. Hence, the CIT by exercising power u/s. 263 of the Act, remitted the issue to the Assessing Officer to conduct necessary inquiries/verificat....
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....e order passed by the CIT u/s. 263 of the Act for these assessment years. In the present case, the Assessing Officer being satisfied about the value of the construction of the property declared by the assessee in its books of account, cannot refer the matter to the DVO. Therefore, it could be said that the Assessing Officer has taken one possible view in this case. Thus, it cannot be said that the assessment order passed was erroneous and prejudicial to the interests of the Revenue. In view of the ratio laid down by the Supreme Court in the case of CIT vs. Greenworld Corporation (314 ITR 81), we find that the Assessing Officer has passed the assessment order after application of mind and considered the value of the property declared in the books of account of the assessee as correct, therefore, the CIT was not justified in interfering with the assessment order on the basis of the valuation report received after the assessment order was framed. Accordingly, we quash the order passed by the CIT under section 263 of the Act for all the assessment years. Hence, the appeals of the assessee are allowed. ITA Nos. 374 to 379 (Revenue's Appeals) 11. In these cases, the Assessing Officer....
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....ction to consider the Valuation Report and redo the assessment after giving due opportunity of being heard to the Appellant. As a consequence, the AO gave an opportunity to the appellant and the appellant raised various objections on DVO's Valuation Report and pointed at various mistakes in the said Valuation Report. However, the AO just brushed aside the objections raised by the appellant by simply stating that all the objections have already been dealt with by the DVO in the Valuation Report. The AO mechanically adopted the figures of Valuation Report and made additions in proportion of the work carried out in various years falling under the Block Period. Thus, from the reading of the assessment order, it is clear that the AO has not considered the objections raised by the appellant. 11.2 This is a case of search and, therefore, it cannot be said that books of accounts maintained by the assessee were not available to the Department or the DVO for verification. Admittedly, no defect or mistake was found in the books of accounts of the assessee, as the AO has not spoken-about any mistake or defect in the assessment order. The books of accounts and the book results have not be....