TaxTMI 
TaxTMI 
2024 (6) TMI 513
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....sposed off by the consolidated order. 3. At the outset, the ld. DR submitted that the matter pertaining to ITA No. 647/JP/2023 and Co No. 08/JP/2023 may be taken as a lead case for discussions as the issues involved in the lead case are common and inextricably interlinked or in fact interwoven and the facts and circumstances of other cases are identical in other assessment year except the difference in the amount added and disputed. The ld. AR did not raise any specific objection against taking that case as a lead case. Therefore, for the purpose of the present discussions, the case of revenue in ITA No. 647/JP/2023 and cross of the assessee in CO No. 08/JPR/2023 for assessment year 2019-2020 are taken as a lead case. 4. Before moving towards the facts of the case we would like to mention that the revenue has assailed the appeal in ITA No. 647/JP/2023 on the following grounds and whereas the assessee preferred cross objections and the grounds of cross objection are also reiterated here in below; Grounds of revenue's appeal: "1.(i) Whether on the facts and circumstances of the case for the assessment year under consideration, the ld. CIT(A) is justified in de....
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....utory provisions of Income Tax Act, making huge illegal additions to the income of the appellant basing thereon, and in filing baseless and frivolous appeal." 5. The fact as culled out from the records is that the search and seizure action 132 of I.T. Act, 1961 was carried out on 13.02.2020 at the residential and business premises of the assessee group and her family members i.e "Saini Gupta Jain Somani Malpani Group" of Ajmer. Various assets had been found at the time of search and some of them were also seized at various places of the group at the time of action u/s 132 of IT. Act. Certain incriminating documents/Loose papers/Books of accounts etc. were also found, inventorized and some of them also seized or impounded at the time of search/survey u/s 132/133A of the IT. Act. The assessee is engaged in business of Manufacturing Activities of Natural Stones like Granite, Sand Stone, Tiles etc. 5.1 Consequent upon to the search notice u/s. 153A was issued on 06.03.2021 which was duly served upon the assessee by E mail. In response to the notice u/s. 153A, the assessee submitted return of income on 15.08.2021 declaring income of Rs. Nil. 5.2 During the course of search proc....
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....ent order for the year under consideration from which following facts comes out: 1. No evidence in any form of documents/paper/diary etc were found during the course of survey/ search action relating to construction expenses which were incurred but the same was not recorded in books. 2. No evidence for any unrecorded expenditure was found during search for purchasing the land on which construction was made. 3. Search was conducted in the year 2020 (13/04/2020) 4. Reference was made to Valuer on the basis of physical overview as written by AO in its assessment order para 7. 5. The factory building was referred for valuation to a private registered valuer Shri Nagendra Chaudhary. He submitted his report on 14.02.2020. The search date was 13.02.2020. Thus, the report had submitted within one day. The appellant had claimed that the valuation officer has not got any explanation or information from the appellant company on the valuation facts, which seems to be on merit. 6. Provision of section 142A has not been followed. 7. The AO had Not made any reference to Valuation officer following the section 142A in which "Valuation ....
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.... the basis of valuation Report in the absence of any corroborative evidence. In view of the above, the AO could not tax the said amounts merely based upon the valuation report in absence of any incriminating and corroborative material to point out under-valuation of the property in question. 14. In search assessment, any undisclosed income, which can ultimately be added, is only to the extent of any unrecorded assets/material found or any corroborative or supporting evidences document found as representing undisclosed income earned. Further, the facts of the present case remains that AO had not gathered any evidences and there is no supporting evidence related to unaccounted expenditure. Thus, the addition made by the A.O. on the basis of private valuer report in the absence of any incriminating material found during the search operation conducted u/s 132 of the Act is liable to be deleted. TAX DEPA 6.4 Considering the above discussion the addition made by AO based upon the valuation report is hereby deleted. Thus, the ground of appeal on this issue is herby allowed. Decision on Ground no. 2 & 3 before the ld. CIT(A) "7.2 I have considered the fa....
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....the value of the asset as claimed by the taxpayer is in accordance with the estimate made by a registered valuer, if the AO is of opinion that the value so claimed is at variance with its fair market value. In simple words, this will be a case in which, the taxpayer has obtained a valuation report of a registered valuer i.e. a private valuer. In such a case there is no quantum of variation to be established to make a reference to the valuation officer. The only requirement is that the Assessing Office should be of the opinion that the value of the asset claimed by the taxpayer and the fair market value of the asset are in variation i.e. both the values differ. The variation i.e. the difference could be of any amount. 2. A case other than above If the case is not covered under (1) above, then the Assessing Officer can make a reference to the valuation officer if he is of the opinion: (i) that the fair market value of the asset exceeds the value of the asset as claimed by the taxpayer by more than such percentage (currently 15%) of the value of the asset as so claimed or by more than such amount as may be prescribed in this behalf or (ii) that having regard....
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....de to Valuation Officer (Department valuer) u/s 142A r.w.s section 55A of the Income tax Act either during search, post search or during the course of assessment proceeding and assessment order has been passed without referring to Valuation officer. The addition was made only on the basis on report of private valuer. 7.6 Considering the above discussion the ground of appeal no. 2 and 3 on this issue is herby allowed. 8.2 I have carefully gone through the assessment order, the written submission along with the paper book and relevant case laws relied by the appellant. 8.3 The section 153D reads as under Prior approval necessary for assessment in cases of search or requisition. 153D. No order of assessment or reassessment shall be passed by an Assessing Officer below the rank of Joint Commissioner in respect of each assessment year referred to in clause (b) of sub-section (1) of section 153A or the assessment year referred to in clause (b) of sub-section (1) of section 153B, except with the prior approval of the Joint Commissioner: Provided that nothing contained in this section shall apply where the assessment or reassessment order, as the case may be, is ....
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.... unexplained investment for construction of the factory premises. Even the assessee also preferred the cross objection in CO No. 08/JP/2023 as the assessee not satisfied from the finding of the ld. CIT(A) contending that his ground for approval granted by the Addl. CIT on mechanical manner and without quoting the DIN is not considered. The assessee also objected the ground of the revenue that the private valuer report be relied upon though there is no specific ground taken by the revenue while challenging the finding of the ld. CIT(A) but since they challenged the addition the assessee submitted that the grounds of the revenue devoid of merit as revenue has accepted the finding of the ld. CIT(A) that no reference can be made to private valuer and upon that finding there is no ground of the revenue and therefore, the appeal of the revenue devoid of the merits. 8. In support of the appeal filed by the revenue the ld. DR vehemently argued that the search team has observed that certain incriminating documents / loose papers / books of accounts etc. were found, inventorised and some of them seized also. She further submitted that as the valuation of the property being land and extra ....
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....se books of account placed on record and verified at the time of survey. Thus, it is very much clear that the reference to valuation is made purely on physical appearance as stated in the assessment order. Thus, it is beyond doubt and there is no material placed on record by the ld. AO in this appeal through ld. DR to counter the finding of the ld. CIT(A). Thus, it has been correctly held by the ld. CIT(A) that the addition made by the ld. AO on the basis of private valuer report in the absence of any incriminating material found during the search operation conducted u/s. 132 of the Act and the same has rightly been held so. The revenue has not challenged this finding of the ld. CIT(A) and therefore, the contention so raised by the revenue is not correct and not valid in law challenging the addition. Thus, making the reference to the registered valuer is nothing but an action based on the surmises and conjectures. There is no search, but survey conducted at the business premises of the assessee, so the contention of the ld. DR that there was search is also not correct. He also submitted that the ld. CIT(A) rightly observed that there is no incriminating material found. Even the ld.....
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....ment year under consideration, the Ld CIT (A) is justified in deleting the addition of Rs 1, 39, 76,229/ made on account of unexplained investment for construction of factory premises without appreciating the fact that the valuation of construction was taken into account as per the report prepared by the registered valuer during the search proceedings in the presence of authorised person/representative of the assessee. Gr.(ii) Whether on the facts and circumstances of the case for the assessment year under consideration, the Ld CIT(A) is justified in law in deleting the addition of Rs 1,39,76,229/ without appreciating the settled principle that when there is difference between the book value of the investment recorded by the assessee and the actual investment made, the matter is considered on merits , thereby ignoring the registered valuer's report that prove beyond doubt that the value of investment recorded in the books were not correct. Grounds of appeal for A.Y.2020-21 Gr (i) - Whether on the facts and circumstances of the case for the assessment year under consideration, the Ld CIT(A) is justified in deleting the addition of Rs 75,03,045/ made on acc....
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....CIT (A) claiming that in making the addition, valuation of the construction was taken into account as per the report prepared by the registered Valuer during the search proceedings, but maintain complete silence on the decision of the Ld CIT (A) of correctly holding the reference to the registered valuer absolutely illegal and in fragrant violation of the statutory provisions. When the Ld CIT (A) has categorically held that valuation of the property can only be done by a Departmental valuer as defined under section 142A r.w.s. Section 55A of the Income Tax Act and no such reference having been made either by the DDIT Investigation or even by the Ld Assessing Officer, without challenging the legality of the decision rendered by the Ld CIT (A) in this regard, there remain no basis for challenging the deletion of addition which is only consequential. The appellant revenue claims that the report was prepared by the vlauer in the presence of authorised person/representative of the assessee, without stating as to how the presence of authorised representative legitimizes the absolutely illegal and arbitrary act of obtaining report from private valuer. When the action of the DDIT ....
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.... 7. The AO had not made any reference to Valuation officer following the section 142A in which valuation officer has the same meaning as in clause (r) of section 2 of wealth Tax Act 1957. 8. No incriminating document was found during the course of search for undisclosed investments. No document/evidences were found or seized regarding out of Books investment in the factory building during the course of search & Survey. 9. It is observed that the addition is neither based on any single loose paper found/seized nor on any statement recorded during the course of search conducted in the case of the appellant who can be considered as corroborative evidence. 10. There are two types of valuer, (1) Registered valuer and (2) Valuation Officer. Registered valuer work in private capacity under a license issued by the Board. Valuation Officer can be termed as Departmental Valuer. They are recognised by the Income Tax Department and are authorized valuer of Income Tax Department. Departmental Valuer, i.e Valuation Officers the Valuation officer approved/authorised by the Income Tax Department. The Tax Authorities will take the recourse of the value estimated b....
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....the decision of the LD CIT(A) of holding the Valuation report of the registered valuer as illegal and without any authority of law- In the appeal filed before the Ld CIT (A) the following specific grounds of appeals were taken as ground no 2 and 3 which read as under; Gr No2 - On the facts and in the circumstances of the case the LD AO has erred in making addition u/s 69 of the Act on the basis of valuation report of a registered valuer to whom a reference was made during the course of survey/search without any authority of law. Gr No 3- (i) The Ld AO grossly erred on facts and in law in making addition u/s 69 on account of unexplained investment in construction of factory building on the basis of illegal report of a registered valuer who is not authorised to make valuation on behalf of department as he is not a 'Valuation officer' as required in clause (r) of Section 2 of Wealth Tax Act 1957. (ii) The Valuer has also not provided an opportunity of being heard to the appellant assessee, which is a mandatory requirement. Ld CIT(A) after considering the detailed factual and legal submissions made before him and after analysing the statutory provisions of Se....
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....rivate valuer as without any authority of law and consequently the valuation report relied upon by Ld AO being rendered absolutely illegal without going into the details of the report. Since the decision of the Ld CIT (A) has been accepted by the department, the department cannot challenge the decision of the Ld CIT (A) citing the very same illegal report. The decision of Ld CIT (A) needs to be upheld for this very reason alone. Submissions in respect of CO ground No 2; The revenue has agitated the decision of the Ld CIT(A) in ground no 2 of the appeal claiming "settled position of law" which is absolutely misdirected and misleading and absolutely perverse. It is submitted that the appellant revenue be asked to file the decisions of the Hon'ble Supreme Court which are directly on the issue, or the decision of the jurisdictional high court directly on the issue which have not been further challenged in appeal before the Supreme Court or the statutory provisions mandating making of additions on the basis of report of the private valuer obtained by the department, or even providing for making reference to a private valuer for ascertaining the value of investment. In the circumstances,....
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....e Hon'ble Apex Court that approval granted without application of mind is not an approval at all in the eyes of law. In this regard reference can only be made to the decision of Hon'ble Orissa High Court in the case of ACIT, Circle-1(2), Bhubaneswar Vs M/s. Serajuddin & Co. Kolkata (IT Appeal No. 0019/00-01) passed by the division bench of Hon'ble Chief Justice S. Muralidhar and Hon'ble Justice M.S. Raman. SLP filed by the revenue against the decision has since been dismissed by Hon'ble Apex Court. Hon'ble ITAT Delhi in the decision dated 13.12.2023 in the case of Finesse International Design Pvt. Ltd. V/s DCIT in ITA No. 1298/Del/2021 held that approval accorded by Additional CIT Range sans DIN is a nullity. Submissions in respect of CO ground No 4. Most humbly it is submitted that it is evident that the present appeal by Revenue is a classic case of abuse of judicial process ,resulting not only into waste of precious time of the Hon'ble Bench but also in continued harassment of the assessee by perpetuating the acts of administrative malfeasance and in malicious prosecution against the assessee. It is submitted that summoning a private valuer in complete....
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.... The acts of administrative malfeasance and illegal exercise of powers by the lower authorities have been set right by the Ld CIT (A) in a very well reasoned and judicious order. However, despite not being able to agitate the decision of the Ld CIT (A) on the illegal reference to Private Valuer resulting into illegal valuation report, the department choose to prolong the harassment of the assessee by filing this vague and unmerited appeal in a very clumsy manner. In the circumstances, it is prayed that the present appeal demands exemplary costs to be levied on the Department. " 10. In addition to the above written submission field earlier on 02/01/2024, the ld. AR appearing on behalf of the assessee also submitted rejoinder and the same is also reproduced here in below: Rejoinder of the Respondent During the course of hearings, the Ld DR relied upon the decision of the Hon'ble Apex Court in the case of Dhakeswari Cotton Mills Ltd vs Commissioner Of Income Tax, 1955 AIR 65. However, it is submitted that the reliance placed upon the decision of the Hon'ble Apex Court is totally misplaced, out of context and inapplicable to the facts and issues involved....
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.... produced before the Accountant-Member in his chamber. No harm would have been done if after notice to the department the trunk had been opened and some time devoted to see what it contained. The assessment in this case and in the connected appeal, we are told, was above the figure of Rs. 55 lakhs and it was meet and proper when dealing with a matter of this magnitude not to employ not reported, unnecessary haste and show impatience, particularly when it was known to the department that the books of the assessee were in the custody of, the Sub-Divisional Officer, Narayanganj. We think that both the Income-tax Officer and the Tribunal in estimating the gross profit rate on sales did not act on any material but acted on pure guess and suspicion. It is thus a fit case for the exercise of our power under article 136" The above observations of the Hon'ble Supreme court fully supports the contention of the assessee. Though Dhakeshwari Cotton Mills case relate to estimation of profits after rejection of Books of accounts, which is not a case here. Here Books of accounts maintained by the assessee have not been rejected but estimation of investment in factory Building has been mad....
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....tio laid down by the Hon'ble Supreme Court, the observations in Dhakeswari Cotton Mills relied upon by the Ld DR are not at all applicable to the present case . As stated earlier that case was related to estimation of profits after rejection of Books of Accounts. After rejection of Books Assessing Officer is duly empowered to make Best judgement assessment, however, in the present case no such powers were invoked by the Assessing Officer and no best judgement assessment was made. Moreover, observations of the Hon'ble Supreme court in that case too, supports only the case of the assessee as the DDIT Investigation and the Assessing Officer have both not only acted illegally but with undue haste and impatience. C. Without prejudice it is also submitted that though there are general powers with the Assessing Officer to conduct enquiry u/s 143(2) of the Income Tax Act, however for the purpose of estimation of valuation of the investment in property, the Statute specifically provides for reference to DVO u/s 142A in case the Assessing Officer is not satisfied with the value recorded in the Books of accounts. When the statute has categorically provided u/s 142A making reference t....
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.... in the assessment order nor it is evident that the same was confronted to the assessee. So we do not find any error in the finding of the ld. CIT(A) that there is no evidence in any form of documents/ paper / diary etc., were found or referred in the proceeding before the lower authority and even before us the ld. AO through the ld. DR did not brough on record that which is the specific material suggesting the reference and we found that thus the what is written in the assessment is the only reason that the physical appearance is the basis of the referring the matter to the registered valuer. The bench also noted that there is no reference any seized material reference suggesting that the assessee has made any unrecorded expenditure which suggest such action to the ld. AO. Thus, there is no material brought to us that the action of the ld. AO is based on any such material suggest the reference and it is only on the physical appearance of the building [ reference at page 7 of the order of the ld. AO ]. The bench also noted from the records that the factory building was search on 13.02.2020 and the report date of the registered valuer is dated 14.02.2020 just one day the registered ....
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....nd thereafter ld. AO has not referred anything of the material or not rejected the books and adopted the valuation report compared it with the books and made the addition which has been detailed discussed by the ld. CIT(A). The bench further noted that the provision of section 55A has provided the circumstances in which and the purposes for which a reference could be made by the tax authorities to a Valuation Officer for valuation of capital asset. Before getting into detailed provisions in this regard, it is important to understand basic provisions relating to nature of Valuer. There are two types of Valuer (1) Registered Valuer and (2) Valuation Officer. Registered Valuer and valuation officer both perform the same task but registered Valuer work in private capacity and can be termed as Private Valuer. Registered Valuer i.e. Private Valuer work in private capacity under a license issued by the Board. Valuation done by the Private Valuer is not binding on the tax authorities. Valuation officer can be termed as Departmental Valuer. They are recognised by the Income-tax Department and are authorized valuer of Income-tax Department. Departmental valuer i.e. valuation officers are the....
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....n: (i) that the fair market value of the asset exceeds the value of the asset as claimed by the taxpayer or (ii) that having regard to the nature of the asset and other relevant circumstances, it is necessary so to do. When any reference is made by the Assessing Officer to the valuation officer under section 55A, then the provisions of following sections of Wealth-tax Act, 1957, shall apply with the necessary modifications. Provisions of sub-sections (2), (3), (4), (5) and (6) of section 16A of the Wealth-tax Act, 1957. Section 16A of Wealth- tax Act, 1957, is similar to section 55A of Income-tax Act. Section 16A of Wealth-tax Act, 1957, contains the provisions relating to making a reference to the valuation officer for making assessment under the Wealth-tax Act. Apart from the provisions of section 55A, section 142A also empowers the Tax Authorities to make a reference to a Valuation Officer. The provisions of section 142A empowers the Assessing Officer 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. "Valuation Officer" has the same meaning as in clause....