TaxTMI 
TaxTMI 
2020 (2) TMI 790
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....eatre by name Fun Junction Multiplex at Sy No.1/1B, Aland Road. Brahampur. Gulbarga, a commercial complex by name Siddhartha Plaza on Plot No.122. Sy. No.1/1B, Aland Road, Brahampur, Gulbarga and an apartment by name Sai Residency at Plot No.35, 36, 47 & 48, Sy. No.1/1 B, Aland Road. Brahampur, Gulbarga. 3. The AO also noted that the assessee undervalued the cost of construction of the above buildings in its books of accounts. It was also found that the land on which the above buildings were constructed was not disclosed in the balance sheet of the assessee. To ascertain the market value of the land and correct cost of construction of the buildings, the properties were referred to the Valuation Cell of the Department u/s 142A. The valuation reports submitted by the valuation officers indicated difference in cost of construction of the buildings as under: ( Rupees) Cost of Construction as on 31-03-2007 Difference As per the Firm's Books of A/c As per the Valuation Report* Fun Junction Multiplex 2,60,75,445 4,36,13,00004, 1,75,37,555 Si Siddhartha Plaza 35,48.720 96,64,047 61,15,327 Sai Residency 32,32,293 36,67,468 ....
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....r affording the assessee opportunity of being heard. The assessee is at liberty to raise all objections regarding the validity of the reference u/s 142A of the Act. All issues are left open." 7. Pursuant to the order of the ITAT the AO took up proceedings in compliance with the order of the ITAT. According to the AO, copies of the valuation reports in respect of land and the three buildings were supplied to the assessee. By a letter on 19-06-2014 the assessee was requested to file its objections, if any, within 10 days of receipt of the reports. This letter was duly served on the assessee on 02-07-2014. To this, the assessee filed a letter on 14-07-2014 seeking two weeks' time to file objections citing preoccupation with family affairs as reason. However. no objections were filed by the assessee within the time sought by it. Since there was no response. a show-cause notice along with a notice u/s 142(1) was issued to the assessee on 17-11-2014 proposing to finalise the assessment on the lines of the order ups 143(3) dated 31-12-2009. The case was posted for hearing on 25-11-2014. This letter was duly served through the Notice Server of this office on 07-11-2014. The assessee....
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....ec.69Cin sec.142A of the Act the AO could not refer the matter regarding the cost of construction of project to DVO under sec.142A of the Act. This argument was rejected by the AO with the following observations; "12.Objections of the assessee are not tenable. The Fun Junction Multiplex was shown as a fixed asset in the balance sheet of the assessee. Even depreciation was also claimed on this asset. This fact was not disputed by the assessee. The Shah Bazar Site was not at all shown in the balance sheet. All the constructions under consideration, including the Fun Junction Multiplex which was classified as fixed asset in the balance sheet of the assessee, were built on this site only. There is nothing on record to show that this was treated as stock-in-trade by the assessee. There is no mention of stock-in-trade in the profit and loss filed by the assessee. The Sidharth Plaza and Sai Residency were shown as just work-in-progress in the balance sheet. They were not classified as closing stock /stock-in-trade. The alleged stock-in-trade in respect of these assets was not shown in the profit and loss account. 13.The case law relied upon by the assessee is distinguish....
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....ess: Cost of construction admitted by the assessee 2,60,75,445 Dif Difference in cost of construction brought to tax u/s 69B 1,42,66,580 2. Siddharth Plaza - Commercial Complex Cost of construction estimated by the DVO (Before rebate for sell-supervision) 1,41,05,447 Less: Rebate for self-supervision @ 7.5% 10,57,909 Net cost of construction estimated 1,30,47,538 C Cost of construction as on 31-03-2007 - 72.84% 95,03,827 L Less: Cost of construction admitted by the assessee 35,48,720 Di Difference in cost of construction brought to tax u/s 69B 59,55,107 3. Sai Residency - Residential Complex C Cost of construction estimated by the DVO (Before rebate for self-supervision) 1,65,35,584 L Less: Rebate for self-supervision @ 7.5% 12,40,169 N Net cost of construction estimated 1,52,95,415 C Cost of construction as on 31-03-2007 - 23.58% 36,06,659 L Less: Cost of construction admitted by the assessee 32,32,293 ....
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....section w.e.f.01-10.2014 to the effect that all the section for reference to the valuation cell is being removed. The appellant contentions are not acceptable because of the fact that the appellant is relying on the amendment made w.e.f.01.10.2014. However, it is not correct5 on the part of the appellant to bring in the amendments made to the provisions of section 142A with effect from a later date. The assessment under consideration is 2007-08. Thus, the amendment to the above provision cannot be made applicable to the year under reference, as the amendment is not with retrospective effect. In the fact and circumstances of the case this ground is untenable and therefore, dismissed". 15. Aggrieved by the order of CIT(A), the assessee is in appeal before the Tribunal. We have heard the parties at length. Before we proceed to decide the appeal on merits, we are of the view that it would be appropriate to decide ground no.2 raised by the assessee before us as preliminary issue. Ground no.2 reads as follows; "2. The CIT(A) failed to appreciate that the reference made by the AO to the valuation officer u/s 142 to the Act is not sustainable in la on the fact....
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....r of controversy before various Courts, some courts deciding in favour and some against the revenue, till the issue was decided by the Apex Court in the case of Smt. Amiya Bala Paul v. CIT [2003] 262 ITR 407 (SC). The legal basis of such references under sections 55A, 142(1), 131 and 133(6) was held as infirm in the said judgment. However, the law has been amended by the Finance Act No. 2, 2004 inserting section 142A with effect from November 15, 1972 enabling the Assessing Officers to make reference to Valuation Officer for the purposes of making an assessment or reassessment under the Act. 18. Sec.142A inserted by the Finance (No. 2) Act, 2004, w.r.e.f. 15-11-1972 and as amended by the Finance Act, 2010, w.e.f. 1-7-2010, read as under : '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 or fair market value of any property referred to in sub-section (2) of section 56 is required to ....
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....ion Officer for estimating the value of investment, expenditure, etc. This section has been inserted with retrospective effect from 15th November, 1972 to save the cases where such references have been made in the past and are still pending in litigation at one stage or the other. Sub-section (1) of the new section provides that 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 for the purposes of making any assessment or re-assessment, the Assessing Officer may require the Valuation Officer to make an estimate of the same and report to the Assessing Officer. Sub-section (2) of the new section provides that the Valuation Officer to whom such a reference is made under sub-section (1) shall, for the purpose of dealing with such reference, have all the powers that he has under section 38A of the Wealth-tax Act, 1957. Sub-section (3) of the new section provides that on receipt of the report from the Valuation Officer, the Assessing Officer may after giving the assessee an opportunity of being....
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....nvestment after taking into account such evidence as the assessee may produce and any other evidence in his possession gathered, after giving an opportunity of being heard to the assessee. (5) The Valuation Officer may estimate the value of the asset, property or investment to the best of his judgment, if the assessee does not co-operate or comply with his directions. (6) The Valuation Officer shall send a copy of the report of the estimate made under sub-section (4) or sub-section (5), as the case may be, to the Assessing Officer and the assessee, within a period of six months from the end of the month in which a reference is made under sub-section (1). (7) The Assessing Officer may, on receipt of the report from the Valuation Officer, and after giving the assessee an opportunity of being heard, take into account such report in making the assessment or reassessment. Explanation.-In this section, "Valuation Officer" has the same meaning as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957)." 23. In Circular No.1 of 2015 dated 21.1.2015 issued by the CBDT, the reasons for substitution of new Sec.142A in place of the earlier Sec.142A of ....
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....e is made. On receipt of the report from the Valuation Officer, the Assessing Officer may, after giving the assessee an opportunity of being heard, take into account such report in making the assessment or reassessment. 43.5 Sections 153 and 153B of the Income-tax Act have also been amended to provide that the time period beginning with the date on which the reference is made to the Valuation Officer and ending with the date on which his report is received by the Assessing Officer shall be excluded from the time limit provided under the aforesaid section for completion of assessment or reassessment. 43.6 Applicability:- These amendments take effect from 1st October, 2014." 24. It can be seen from the aforesaid history of Sec.142A, that the original provisions were introduced for the purpose of enabling to specifically provide that an Assessing Officer has the power to make a reference to the Valuation Officer for estimating the value of investment, expenditure, etc. The power was given to make a reference to the Valuation Officer purpose for the purposes of making an assessment or reassessment under this Act, (i) where an estimate of the value of any investment....