TaxTMI 
TaxTMI 
2020 (2) TMI 790
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.....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 4,35,175 4. The assessee was asked to explain the above discrepancy in the cost o....
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....rence 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 did not file any objections even to this notice. Instead, a letter was filed on 24-11-2011 stating that a review petition was filed before ....
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....s 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 distinguishable on facts. In that case the AO had doubts about the expenditure incurred on the project. In the case of the assessee the cost of investment was under enquir....
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....bsp; 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 Dif Difference in cost of construction brought to tax u/s 69B 3,74,366 4. Shah Bazar Land Val Vaue of the land estimated by the DVO 95,16,000 Le Less: Cost admitted in by the assessee Nil Va Value of the undisclosed investment brought to t....
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....isions 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 facts and circumstances of the case". It can be seen from ground no.2 raised by the assessee, it the plea of the Assessee that since reference to the DVO made by the AO was without rejecting the books of accounts maintained by the assessee, the report of the DVO and the consequent addition made to the total income by the AO as unexplained investments in construction cannot b....
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....ce 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 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 he has under section 38A of the Wealth-tax Act, 1957 (27 of 1957). (3) On receipt of the report from the Valua....
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....llery 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 heard, take into account such report in making such assessment or re-assessment. It has been provided in the proviso to the new section that the provisions of the same shall not apply in respect of an assessment made on or before the 30th day of September, 2004 and where such assessment has become final and conclusive on or before that date, except in cases where a reassessment is required to be made in accordance with the provisions of section 153A. This amendment ta....
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.... 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 the Act has been explained thus: "43. Estimate of value of assets by Valuation Officer and time limit for completion of assessments where reference made 43.1 The provisions contained in section 142A of the Income-tax Act, before its amendment by the Act, provided that the Assessing Officer may, for the purpose of making an assessment or reassessment, require the Valuation Officer to make an estimate of the value of any investment, any bullion, jewellery or fair market value of any property. On receipt of the report of the Valuation Officer, the ....
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....t 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 referred to in section 69 or section 69B or (ii) the value of any bullion, jewellery or other valuable article referred to in section 69A or section 69B or (iii) fair market value of any property referred to in sub-section (2) of section 56 is required to be made. Because the law was retrospective in its operation, the legislature wanted to safeguard concluded assessments being reopened and therefore by proviso to Sec.142A(3) of the Act, it was Provided that nothing contained in section 142A shall apply in respect of an assessment made on or before the 30th day of September, 2004, and where such as....