TaxTMI 
TaxTMI 
2008 (11) TMI 154
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....aside the order of the Assessing Officer as well as that of the learned Commissioner of Income-tax (Appeals) (hereinafter referred to as "the CIT(A)" ). 3. Heard the counsel for the parties and perused the record. Brief facts of the case are as follows: 4. For the assessment year 1998-99, the assessee, Shri Bhawani Shankar Vyas, proprietor of M/s. Shiva Sanitary Store had filed its return declaring an income of Rs. 90,350. The case was processed under section 143(1) on May 14, 1999. The case was then fixed for scrutiny and notices issued by the concerned Income-tax Officer on August 27, 1999, which was served upon the assessee on August 31, 1999. The assessee is a proprietor of M/s. Shiva Sanitary Store and has disclosed the income from purchase and sale of sanitary items. For the said assessment year, the assessee had filed two balance-sheets, (A) for M/s. Shiva Sanitary Store, and (B) for M/s. Hotel Gangore. Notice under section 142(1) was issued by the Income-tax Officer on July 26, 2000, which was served upon the assessee on the same date. In this notice, information was sought from the assessee on various aspects of his income. Subsequently, a notice under section ....
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....E of the Income-tax Act were issued to the assessee. The said assessment order was passed by the Income-tax Officer on March 28, 2001, as against Rs. 90,350 as disclosed by the assessee. 6. Aggrieved by the assessment order the assessee filed an appeal before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals), however, agreed with the Assessing Officer and rejected all the reports which were submitted by the assessee such as the report of the municipal engineer as well as by the Government approved valuers and then after examining the report of the Departmental Valuation Officer though agreeing largely with the correctness of the report, he recorded that this was somewhat, on the higher side considering the facts that it was the CPWD rates and not the UPPWD rates which were applied. Accordingly, the Commissioner of Income-tax (Appeals) reduced the valuation by 15 per cent. to arrive at the cost of construction as per the UPPWD rates. Thereafter, he considered the higher rates applied by the Assessing Officer regarding raw materials and a difference of Rs. 1,86,235 was worked out by him. He allowed a further deduction of 5 per cent. on account of a....
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.... accounts submitted by the assessee. The Tribunal has come to the conclusion that in the present case the assessee has filed three valuation reports including a certificate of engineer, all of which were examined by the Tribunal. On a careful perusal of the order of the Assessing Officer and that of the learned Commissioner of Income-tax (Appeals), the Tribunal came to a finding that the books of account, valuation reports, etc., submitted by the assessee were proper and both the Assessing Officer as well as the Commissioner of Income-tax (Appeals) has committed an error in not relying upon them. The Tribunal, therefore, expressed its inability to concur with the finding of the Departmental authorities in estimating the cost of construction as done by them. 9. The substantial questions of law on which the appeals were admitted are as follows: "1. Whether the Income-tax Appellate Tribunal was justified in holding that without rejecting the books of account, the Assessing Officer was not justified in making reference to the Departmental Valuation Officer, ignoring the retrospective effect of the provisions of section 142A of the Income-tax Act? 2. Whether it is mandatory to ....
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.... stock register, I conclude that the assessee' s books are such as true and correct income of the assessee cannot be deduced by me, however, I restrict myself to rejecting of the books only to the extent of disallowance of expenditure claimed by the assessee in the profit and loss account." 12. Moreover, the judgment of the Rajasthan High Court predates the amendment brought in the Income-tax Act in the year 2004 whereby section 142A was inserted, which we will discuss shortly. 13. Suffice would it be to say that where the Income-tax Officer while making his assessment had doubts on the correctness of the accounts submitted by the assessee, in such a condition, in our considered view, after perusal of the relevant provisions of the Act, we find that the income-tax authority was perfectly justified in making a reference to a departmental valuer without formally or categorically rejecting the books of account submitted by the assessee. This view is further strengthened by section 142A which was inserted in the Act by the Finance Act of 2004 with retrospective effect from November 15, 1972. Section 142A is being reproduced below: "142A. (1) For the purpose of making an assess....