TaxTMI 
TaxTMI 
2021 (2) TMI 459
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....resaid appeals by this consolidated order. For the sake of convenience, the facts relating to AY 2008-09 are taken as lead case and the result will be followed in all the other appeals. 2. The revenue has challenged the merits of the addition deleted by the Ld. CIT(A) whereas the assessee has challenged the legal issue as to whether any addition can be made u/s. 153A of the Income-tax Act, 1961 (hereinafter referred to as the "Act") without any incriminating material unearthed during search qua the assessee in the assessment years which were not pending before the AO on the date of search u/s. 132 of the Act on 13.03.2014 viz., (AYs 2008-09 to 2012-13). 3. Coming to the revenue appeal, the first ground of appeal of the revenue reads as under: "1. Whether Ld. CIT(A) is justified in deleting addition of Rs. 3,50,39,665/-, when AO had made the addition as unexplained investment u/s. 69 of the I. T. Act, on basis of valuation report of the District Valuation Officer (DVO)." 4. Brief facts of the case as noted by the AO are that the assessee (educational Trust) had filed original return of income for AY 2008-09 on 30.09.2008 disclosing total income of Rs. Nil. The AO n....
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....4, added back to the total income of the assessee the following amount for the respective assessment years as under: Asst. Year Amount 2008-09 Rs. 3,50,39,665/- 2009-10 Rs. 14,34,16,954/- 2010-11 Rs. 5,05,88,806/- 2011-12 Rs. 4,13,91,409/- 2012-13 Rs. 4,91,11,619/- 2013-14 Rs. 8,93,33,543/- 6. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) wherein the assessee had challenged the validity of the DVO report which was the only basis on which the additions were made by the AO by raising an additional ground as under for all assessment years: "For that the Valuation Officer to whom the reference was made by the AO for determination of cost of construction u/s. 142A of the Act, having not sent a copy of the report of the estimate made under sub-section (4) if sub-section (5), as the case may be within a period of six months as provided u/s. 142A(6) the reference so made becomes infructuous." 7. The aforesaid additional ground which was legal in nature was admitted by the Ld. CIT(A) and after having called upon from the AO a remand report on this issue, the Ld. CIT(A) took up on himself the exercise to call for th....
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....ording to Ld. A.R since Ld. CIT(A) has not accepted/allowed the legal issue raised by it, therefore, the assessee trust has preferred these cross appeals challenging this impugned action of the Ld. CIT(A). 9. We have heard rival submissions and gone through the facts and circumstances of the case. We note that the Ld. CIT(A) by allowing the additional ground of appeal (supra) has held that the initial DVO report [pursuant to the reference made by DDIT/ADIT(Inv)] on the basis of which the AO has made the impugned additions in all the assessment years were non-est, resulting in deletion of all the impugned additions made by the AO, which has been challenged by the department by raising the following grounds of appeal which are as follows: "1. Whether Ld. CIT (A) is justified in deleting addition of Rs. 3,50,39,665/-, when A.O. had made the addition as unexplained investment u/s 69 of the IT. Act., on basis of valuation report of the District Valuation officer(DVO)? 2. Whether Ld. CIT (A) is justified in accepting assessee's contention that before introduction of section 132(9D) of the Act., the DDIT (Inv.) had no authority to refer the matter relating to valu....
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....d for revaluation of the properties. Therefore, the AO notes that he requested DVO to re-value the properties again which did not yield any result. It is noted that the assessee had objected to the action of DDIT(Inv) to have made reference to the DVO which according to the assessee the said authority [DDIT(Inv)] did not had powers to do so; and at that point of time only the AO u/s 142A of the Act could have called for the same which fact according to Ld. A.R is evident since this power was conferred on the DDIT (Inv) by inserting sub-section (9) in section 132 of the Act on 01.04.2017 and in this case [DVO on reference of DDIT(Inv) dated 11.07.2014, who in turn submitted the valuation report on 18.12.2014 makes it clear that DDIT(Inv) had made reference before 01.04.2017]. When this objection that in the year 2014 (i.e. on 11.07.2014), the DDIT (Inv) lacked powers / jurisdiction to call for valuation report from DVO, the AO in his wisdom realizing the error in order to correct it had called for the valuation report vide letter dated 22.01.2016. However the AO acknowledges that pursuant to his reference dated 22.01.2016, the DVO did not furnish the Valuation Report till the date o....
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....e the relevant provision i.e. section 142A of the Act (substituted by the Finance (No.2) Act, 2014, w.e.f. 01.10.2014). Reference to the DVO which reads as under: Estimation of value of assets by Valuation Officer "142A. (1) The Assessing Officer may, for the purposes of assessment or reassessment, make a reference to a Valuation Officer to estimate the value, including fair market value, of any asset, property or investment and submit a copy of report to him. (2) The Assessing Officer may make a reference to the Valuation Officer under sub-section (1) whether or not he is satisfied about the correctness or completeness of the accounts of the assessee. (3) The Valuation Officer, on a reference made under sub-section (1), shall, for the purpose of estimating the value of the asset, property or investment, have all the powers that he has under section 38A of the Wealth-tax Act, 1957 (27 of 1957). (4) The Valuation Officer shall, estimate the value of the asset, property or investment after taking into account such evidence as the assessee may produce and any other evidence in his possession gathered, after giving an opportunity of....
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.... 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. 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)." 15. It is noted from the history of the enactment made by the Parliament conferring power to the AO to refer to the Valuation Officer was made from Finance Act, 2004 by the introduction of section 142A by Finance Act, 2004. Before that, the power of the AO to refer to Valuation Officer was confined to ascertain the fair market value of capital asset in respect of computation of capital gains under section 55A of the Act [which was inserted by the Taxation Laws (Amendment) Act, 1972 w.e.f. 01.01.1973]. It is noted that section 142A was brought in specifically to enable the AO to refer valuation to the DVO of assets, property etc since before that in the case of Smt. Amiya Bala Paul Vs. CIT 262 ITR 407 (SC), the Hon'ble Supreme Court held that AO did not had power to refer to DVO for valuation in respect of assets, properties etc other than for the specific purpos....
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....s house to the Valuation Officer under Section 55 A of the Act, he had ample power under Sections 131 (1), 133 (6) and 142 (2) of the Act to ask for a Valuation Report from the Valuation Officer. It was held that each of these sections were "enabling machinery provisions which invested ample powers in the Assessing Authority", and that any wrong mention of the provision on the requisition memo would not be material. Accordingly the question referred was answered in the affirmative and against the assessee. In the appeal before us, it was contended on behalf of the assessee that a reference to a Valuation Officer could only be made strictly in terms of section 55 A of the Act and that if the circumstances justifying the reference under that Section were not prevailing, the Assessing Officer did not have the jurisdiction to otherwise refer the matter to the Valuation Officer. It was further pointed out that Section 55 A of the Act only allows for reference to the Valuation Officer for the purposes of computing the market value of property in connection with the computation of capital gains. It was also submitted that reference to the Valuation Officer had been specifically p....
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....e decision of the High Court set aside. There will be no order as to costs."[Emphasis given by us] 17. In the light of the decision of the the Hon'ble Supreme Court in Smt. Amiya Bala Paul Vs. CIT (supra) the Parliament gave power to AO by the introduction of section 142A by Finance Act, 2004 (supra). Later on the Parliament taking note that the Authorized Officer of the searched party u/s. 132 does not have the power to refer for valuation to the Valuation Officer inserted sub-section (9B) in section 132 of the Act by Finance Act, 2017 i.e. w.e.f. 01.04.2017. Sub-section (9B) of section 132 of the Act reads as under: "Search and Seizure S.132. (9).......... (9A)......... (9B) ........ (9C)...... (9D) The authorized officer may, during the course of the search or seizure or within a period of sixty days from the date on which the last of the authorizations for search was executed, make a reference to a Valuation Officer referred to in section 142A, who shall estimate the fair market value of the property in the manner provided under that section and submit a report of the estimate to the said officer within a period of sixty ....
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....ce and, therefore, the report sent by the Valuation Officer u/s. 142A(6) of the Act is also a statutory report and, therefore, time limit prescribed therein are statutorily limited by time and the report if not made within the statutory time i.e. six months from the end of the month from which the reference is made will be considered as an arbitrary/whimsical exercise of power by the Valuation Officer without any regard to the statutory limited time prescribed by the statute and it would vitiate the action of DVO. In this case, we found that on 13.03.2014 the search happened and the reference was made by the DDIT (Inv.) on 11.07.2014 and the DVO sent the valuation report on 18.12.2014 (initial DVO report) which we have already found that the DDIT/ADIT (Inv.) did not had the power/jurisdiction to make the reference to the Valuation Officer. Therefore, the action of Ld. CIT(A) allowing the appeal on merits cannot be said to be legally erroneous is in line with the ratio of the decision of the Hon'ble Supreme Court in Smt. Amiya Bala Paul (supra), since DDIT (Inv) did not had the power to refer to DVO valuation of construction of buildings. Even though the AO in the assessment order s....
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....ill vitiate the valuation report dated 18.12.2014 for violation of Natural Justice and could not have been acted upon by the AO being bad in law. 21. To sum up the facts, we note that the AO had made the entire addition in all assessment years based on the initial valuation report submitted by the Valuation Officer pursuant to the reference made by the DDIT (Inv.) dated 11.07.2014 when he [DDIT (Inv.)] did not had the power to make the reference to the DVO which power he acquired as noted above only on 01.04.2017 by Finance Act, 2017 u/s. 132(9D) of the Act. And it has also been noted that neither the DVO filed the valuation report pursuant to the AO's reference dated 22.01.2016 nor the DVO filed the valuation report pursuant to the Ld. CIT(A)'s reference through the AO by letter dated 29.01.2019. Thus, we note that the addition has been made only on the basis of the initial valuation report dated 18.11.2014 which was pursuant to the DDIT(Inv.)'s reference which he [DDIT (Inv)] had no power to do call for; and that during assessment proceedings when the AO show caused the assessee with the valuation report as contemplated in sub-section (7) of section 142A of the Act, the assess....
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....ave been relied upon to make additions cannot be faulted is in line with the ratio of the decision of the Hon'ble Supreme Court in Smt. Amiya Bala Paul (supra). Further at para 20 (supra), we have taken note of the Ld CIT(A) observation in the letter dated 29.01.2019 wherein he has observed that DVO did not give opportunity to assessee before preparation/submission of DVO report dated 18.12.2014 (initial DVO report), so this DVO report is fragile for violation of natural justice and resultantly bad in law and could not have been the sole basis for addition Consequently, when we keep aside the initial valuation report of the DVO dated 18.12.2014 for the legal infirmities discussed (supra) and on the reasoning/ratio of the decision of the Hon'ble Supreme Court in Smt. Amiya Bala Paul (supra), we find there is no other evidence to support the addition, so the addition made by the AO in all the assessment years from AY 2008-09 to AY 2013-14 has to be deleted and Ld. CIT(A)'s action cannot be faulted and we confirm it on the reasons given supra and dismiss all the Revenue Appeals. 23. Now coming to the legal issue raised by the assessee, we proceed to answer the question. Whether in ....
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....ices u/s 153A of the Act to assess the income of the assessee for six assessment years preceding the date of search. These six assessment years comprise of assessments which are not abated ( non-pending assessment before AO on the date of search ); and assessments which are pending before the AO on the date of search, which would be treated as abated. In the case of abated assessments, the AO is free to frame the assessment in regular manner and determine the correct taxable income for the relevant year inter alia including the undisclosed income un-earthed during search, having regard to the provisions of the Act. However, in relation to unabated assessments (AYs), which were not pending on the date of search, there is a restriction on the powers of the AO. In case of unabated assessments, the AO can re-assess the income only to the extent and with reference to any incriminating material which the Revenue has unearthed in the course of search. Merely because an assessee is subjected to search, he cannot be placed on a different pedestal or put in a more disadvantageous position than an assessee who is not subjected to search unless in the course of search some incriminating docume....
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....he jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the Ld AO. Completed assessments can be interfered with by the Ld AO while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment." 38. The present appeals concern AYs 2002-03, 2005-06 and 2006-07, on the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed." The Hon'ble Apex court in the case of CIT v. Sinhgad Technical Education Society 397 ITR 344 in the context of section 153C of the Act has held as under: "18) In this behalf, it was noted by the ITAT that as per the provisions of....
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....-06. The learned Tribunal was of the opinion that the Assessing Officer had no jurisdiction under Section 153A of the Income Tax Act to reopen the concluded cases when the search and seizure did not disclose any incriminating material. In taking the aforesaid view, the learned Tribunal relied upon a judgement of Delhi High Court in the case of CIT[A] vs. Kabul Chawla in ITA No.707/2014 dated 28th August, 2014. The aggrieved Revenue has come up in appeal. Mr. Bagaria, learned Advocate appearing for the assessee, submitted that more or less an identical view was taken by this Bench in ITA 661/2008 [CIT vs. Veerprabhu Marketing Ltd.] wherein the following views were expressed - "We are in agreement with the views expressed by the Karnataka High Court that incriminating material is a pre- requisite before power could have been exercised under section153C read with section 153A. In the case before us, the assessing officer has made disallowances of the expenditure, which were already disclosed, for one reason or the other. But such disallowances were not contemplated by the provisions contained under section 153C read with section 153A. The disallowances made ....