TaxTMI 
TaxTMI 
1990 (7) TMI 139
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....rmined the amounts of investments made in each of the three years at figures different from those returned by the assessee. The ITO, adopting the report of the DVO, finalised the assessments at the figures of the valuation of the investments as determined by the DVO. This resulted in addition of sufficiently good amount to the total income of the assessee in each of the three years which the ITO made under section 69B of the IT Act, 1961 (the Act). To be clear on the point the final position came to this : ------------------------------------------------------------------------------------------------------------------------------------------------- A.Y. Value as per Value as per Difference assessee DVO/ITO added u/s 69-B ------------------------------------------------------------------------------------------------------------------------------------------------- 1981-82 3,40,505 5,32,121 1,91,616 1982-83 6,29,800 10,59,780 4,29,980 1983-84 2,79,106 4,35,999 1,56,893 ------------------------------------------------------------------------------------------------------------------------------------------------- 3. Aggrieved against the additions as made ....
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.... " 1. On the facts and in the circumstances of the case, the CIT(A) has erred in deleting the justifiable addition u/s 68 of the IT Act being unexplained difference between the cost of construction as reported by the District Valuation Officer and that debited in the books of accounts. It is not proper to give an outright reduction in such cases without hearing the District Valuation Officer who is a technically qualified person and his report cannot be altogether ignored without giving an opportunity of being heard. 2. Instead, the CIT(A) should have set aside the assessment with a direction to give reasonable opportunity to the assessee against adoption of cost of construction as reported by the Dist. Valuation Officer and consequent addition thereby if the ITO has initially failed to do so and to make a fresh assessment in accordance with law." 6. At the very outset it may be pointed out that the assessment for A.Y. 1981-82, as had been reopened by the ITO u/s 147/148 of the Act had been held to be bad in law by the CIT(A). In the appeal for that year the revenue has not challenged that part of the order of the CIT(A). On the face of it, therefore, the appeal for A.Y. 1981....
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....favour of the assessee. In support of his arguments, Mr. Patel heavily relied upon the full bench decision of the Punjab & Haryana High Court in the case of Jindal Strips Ltd. v. ITO [1979] 116 ITR 825. 10. The arguments advanced on both sides take us to consider the scope of applicability of sec. 55A of the Act. In the cases relied upon by the learned counsels for the parties, the scope of applicability of sec. 55A has been considered differently, rather contradictingly. In the case of Daulatram the Andhra Pradesh High Court has held that " though section 55A falls under the sub-chapter titled ' Capital gains ' the intention of the Legislature is obvious as the words that have been employed are ' for the purpose of this chapter ' denoting thereby that while computing the income various factors might fall for determination and, therefore, whenever such contingency does arise, the ITO can ascertain it through the agency of the valuation officer ". The Hon'ble High Court has further held that on such a reference the provisions, inter alia, of sub-sections (2) to (6) of sec. 16A and sub-sections (3A) & (4) of section 23 of the W.T. Act, 1957 are ipso facto applicable by extension a....
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.... would, clearly fall within the purview of sub-chapter E of Chapter IV of the Act. The same result can be arrived at from another angle. Section 55 to which section 55A was added with effect from 1-1-73 by the Taxation Laws (Amendment) Act, 1972, defines the meanings of the terms like " adjusted ", " cost of improvement " and " cost of acquisition ". Sub-section (3) of section 55 reads asunder : " Where the cost of which the previous owner acquired the property cannot be ascertained, the cost of acquisition to the previous owner means the fair market value on the date on which the capital asset became the property of the previous owner." [Emphasis supplied] It may be noted that the concept of fair market value in the matters of computation of income on transfer of capital asset had been considered under sub-section (3) of section 55. With a view to define the mode of ascertaining the fair market value of a capital asset, which had been referred to in sub-section (3) of section 55, section 55A appears to have been brought on the statute book. It can thus be seen that it was to further the object of section 55(3) of the Act that section 55A lays down that with a view to ascerta....
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.... based his order on the report of the DVO, without giving an opportunity of being heard to the assessee, the order was, on the face of it, bad in law and has been rightly turned down by the CIT(A) in appeal. 13. We find ample force in the arguments of Mr. Patel. During the course of hearing Mr. Shah produced before us the letter of the ITO dated 5-7-83 which clearly shows that he had authorised the Assistant Valuation Officer of the income-tax department u/s 131(1)(d) of the Act in order to ascertain the correctness of the cost of construction of the building under consideration. Sec. 131(1)(d) clearly confers such a power on the ITO and says that in the matters like issuing commissions for the purposes of the Act, the income-tax authorities, including the ITO, shall have the same powers as are vested in a court under the Code of Civil Procedure, 1908 (5 of 1908). By issuing the commission in the instant case the ITO had adopted quite a legal method for ascertaining the cost of construction of the building in this case. But after having done that the ITO seems to have fallen into error by considering the report of the DVO as binding upon him. That is what he has done in the pres....
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....h submitted that if the CIT(A) had come to the conclusion that the report of the AVO could not be relied upon as the same had been used by the ITO without giving reasonable opportunity of being heard to the assessee, the learned CIT(A) should have sent the case back to the ITO to make fresh assessments in accordance with law. Mr. Patel vehemently opposed the suggestion of giving this case a second round. He urged that a second round to this case was not only prejudicial to the interest of the assessee but was also uncalled for the obvious reason that the assessee had maintained the construction account which was duly supported by the relevant bills and vouchers and at no stage of the proceedings, the ITO had ever, doubted such accounts submitted by the assessee, what to speak of rejecting them. 16. We would have acceded to the request of revenue of remitting the case back to the ITO for making re-assessments after having given an opportunity to the assessee of opposing the report of the AVO had we not felt convinced that such an order by us would certainly be prejudicial to the interest of the assessee and would lay down a very wrong precedent. It has clearly been found above th....