TaxTMI 
TaxTMI 
2022 (4) TMI 806
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....e appeals have been heard together and are being disposed of by this consolidated order. 3. First, we shall take Revenue's appeals in ITA Nos.2867 to 2869/AHD/2016. To adjudicate these appeals of Revenue, we take lead case in ITA No. 2867/AHD/2016 for assessment year 2008-09. 4. Grounds of appeal raised by Revenue (in lead case in ITA No.2867/AHD/2016), are as follows: "1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in allowing the appeal of the assessee and in quashing the reopening proceedings u/s 148 of the Act even though the AO has formed his belief for escapement of income on the basis of the incriminating documents/files impounded during the survey proceedings. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has ignored the loose papers files, which constituted admissible evidences were relied upon by the assessee and AO while forming belief of escapement of income and not completely relying upon the basis of DVO's report. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in accepting the argument of assessee that books of accoun....
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....e case of M/s K.K. Plaza which were impounded by the Department and named as Bl-8 and Bl-18 under the impounded documents. Apart from this, there was also impounding of documents etc. in the case of M/s K.K. Biscuit Bakery. The statements of the following persons were recorded during and after the survey: (i) Shri Khemchand Tharwani Proprietor M/s K.K. Biscuit Bakery on 10.11.2009. (ii)Shri Khemchand Tharwani Proprietor M/s K.K. Biscuit Bakery on 13.11.2009. (iii) Shri Rajeshbhai Khemchand Tharwani on 13.11.2009. (iv) Shri Mahendra B. Patel, a labour contractor on 23.11.2009. During the survey there was no disclosure of additional income by the assessee in either of the two proprietary concerns i.e. M/s K.K Biscuit Bakery and M/s K.K. Plaza. During the course of recording of the statement, assessee admitted that the project of M/s K.K. Plaza was started in 2007 and it contains 8 floors in which there are 54 shops and 35 flats. The total built up area was approximately 73,000 sq. ft. Regarding the assessment year under reference, the assessee filed the return of income on 24.09.2009 declaring total income at Rs. 12,21,950/-. 7. The assessing....
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....rther, it was mentioned that during survey loose files were found and impounded and marked as Bl-8 and Bl-18 which shows that certain bills and vouchers are not correlated with the accounts or not accounted for. Due to this reason, the assessing officer mentioned that it requires rejection of books of accounts u/s 145 of the Act and the difference of Rs. 2,54,03,150/- has to be considered as unexplained investments made by the assessee. Then the assessing officer concludes that all this has led him to believe that income to the extent of Rs. 2,54,03,150/- has escaped assessment within the meaning of section 147 of the Act. 9. The purpose to make, reference to the DVO, in fact, was for calculation and adoption of rates that references were made to the DVO where the assessee was supposed to assist the DVO in arriving at the most reasonable rate applicable to assessee's case. However, the assessee failed to do so. The assessee has also not furnished any report on cost of construction by his architect/engineer as assured by him. Thus, in view of the preceding discussion, the assessing officer was of the considered opinion that the books of account as maintained by the assessee do no....
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....y which was not correlated/reconciled with the books of accounts. No show cause notice was issued showing intention to reject the books of accounts before referring the matter to DVO. The learned counsel further pointed out that report of DVO is not an information for re-opening assessment u/s 147 of the Act. The AO has to apply his mind to the information if any collected and must form a belief on them. Therefore, ld Counsel prays the Bench that order passed by ld CIT(A) may be upheld. 13. We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. We note that issue involved in this lis is no longer res-integra. The Assessment, on the basis of DVO's report, cannot be reopened as held by the Hon'ble Supreme Court in the case of M/s Dhairya Construction Co. reported in 328 ITR 555 and in the case of Sargam Cinema reported in 328 ITR 513. Therefore, Let us, first analyze the reasons recorded by the assessing officer. For the sake of clarity, the rea....
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.... Considering all the aspects, the case of the assessee was referred to the DVO to ascertain correct cost of construction. The DVO has furnished his report on 20/05/2013. On verification of report furnished by the DVO, it is observed that the DVO has assessed cost of construction for the F.Y. 2007-08 related to A.Y. 2008-09 at Rs. 3,40,09,203/- (excluding land) as against the assessee has shown cost of construction of Rs. 86,06,053/- (As per DVO report). Thus, it is observed that the assessee had made unexplained investment of Rs. 2,54,03,150/- during the F. Y. 2007-08. [5] It is pertinent to note that the DVO in his report mentioned that the assessee has not submitted any ledger account in support of investment and submit only a few bills / vouchers which do not carry any significance. It is further submitted that during the course of survey proceedings, loose files were found and impounded at BI-8 and BI-18 which shows that certain bills and vouchers are not co-related with the accounts or not accounted. Looking to the facts and circumstances of the case, it is required to reject the books of account maintained by the assessee u/s 145 of the Act and the difference of Rs. ....
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....ying the amounts contained therein. The Hon'ble Supreme Court in the case of ITO V/s Lakhmani Mewaldas (1976) 103 ITR 437 summarized as to what constitutes "reason to believe" for the purpose of section 147 of the Act, as follows: "(a) The powers of the Assessing Officer to reopen an assessment, though wide, are not plenary. (b) The words of the statute are "reason to believe" and not "reason to suspect". (c) The reopening of an assessment after the lapse of many years is a serious matter. Since the finality of a judicial or quasi-judicial proceedings are sought to be disturbed, it is essential that before taking action to reopen the assessment, the requirements of the law should be satisfied. (d) The reasons to believe must have a material bearing on the question on escapement of income. It does not mean a purely subjective satisfaction of the assessing authority; the reason be held in good faith and cannot merely be a pretence. (e) The reasons to believe must have a rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the I....
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....ssioner of Income Tax (Appeals) Valsad grossly erred in not deleting the impugned addition without appreciating the fact that the reference made by the AO to the Valuation Officer for determination of cost of construction was not justified in law as the AO has not rejected the books of account of the assessee before making such reference and the conditions required u/s 142A and 131(1)(d) of the I.T. Act were not fulfilled. 3. In the facts and circumstances of the case as well as in law, the learned Commissioner of Income Tax (Appeals) Valsad grossly erred in not deleting the impugned addition, in utter disregard to the fact that the AO has made reference to the DVO on 11/12/2012 u/s 131(1)(d) of the I.T. Act for determination of cost of construction whereas on the date of such reference, assessment proceedings for A.Y 2012-13 were not initiated and the first statutory notice u/s 143(2) was issued only on 12/8/2013. Therefore, the reference made by the AO to the DVO is illegal. 4. In the facts and circumstances of the case as well as in law, the learned Commissioner of Income Tax (Appeals) Valsad grossly erred in not deleting the impugned addition by capriciously h....
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....elow: i) The cost of construction is Rs. 8,15,139/- ii) Reference to DVO was made without fulfilling all the condition of Section 131(1)(d) of the Act. iii) The DVO worked out the cost of construction only by adopting the method of CPWD plinth area rate 2007 and cost index method in spite of the fact that the full details were supplied by the assessee. iv) No reduction in the cost of construction was made by considering 15% as supervision charges. v) The DVO worked out the year wise cost of construction without disclosing the basis for the same. vi) The DVO arrived at average weighted CI for the period on the base year at Rs. 126/- without disclosing the base for the same. vii) DVO's valuation shows cost of construction at Rs. 1500/- per sq.ft. which is much higher than the actual cost. 21. After considering the submission of assessee, the ld CIT(A) partly allowed the appeal of the assessee observing as follows: ".....Before the DVO, the assessee has not presented his case despite opportunity of being heard was given. By not availing the opportunity, it can be inferred that the assessee was not having any ob....