TaxTMI 
TaxTMI 
2003 (9) TMI 289
X X X X Extracts X X X X
X X X X Extracts X X X X
....uld have held that the entire proceedings right from commencement thereof to the conclusion in terms of the assessment order dt. 30th March, 2002, were without jurisdiction. 1.3 Because, otherwise also, the DVO's report by itself, dt. 25th Nov., 1999, could not have constituted the "material" so as to lead to the formation of "reason to believe" that any income had escaped assessment, and consequently the very initiation of proceedings under s. 147 was illegal. 1.4 Because, in any case the "reasons recorded" by the learned AO vide order-sheet entry dt. 25th Jan., 2001, could not have been held to have met the requirement of law and issuance of notice under s. 148, on that basis, is wholly illegal. 2. Because the notice served on Shri Lal Sahab Singh cannot be treated to be the service of notice in accordance with the provisions of law and the assessment order dt. 30th March, 2002 based on such a notice is wholly without jurisdiction. Without prejudice to the aforesaid 3. Because the authorities below have erred in law and on facts in holding that investment in construction of house property to the extent of Rs. 3,82,500 remained unexplained and in adding/sustaining by way....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pellant disputes levy of interest under various sections, even on the ground independent of quantum of assessment. 11. Because the order appealed against is contrary to the facts, law and principles of natural justice." 2. This appeal was taken up for early hearing vide our order dt. 6th June, 2003 passed in stay petition No. 8 of 2003. 3. We have heard the learned counsel for the assessee. The learned counsel for the assessee on earlier dates filed detailed paper book, copy was also given to the learned Departmental Representative. The paper book contained mainly copy of notice under s. 148, reasons recorded by the AO, order-sheet entries, copy of Inspector's report, balance sheet and capital account for the assessment year in question of the preceding three years, copy of the confirmatory letters, pass book of the depositors, copy of the notice issued by the City Magistrate, copy of the report of the DVO and the case law relied upon by the learned counsel for the assessee. However, none appeared on behalf of the Revenue, therefore, Revenue is proceeded ex parte. 4. The brief facts taken from the record are that the Inspector of IT submitted his report dt. 27th March, 1998....
X X X X Extracts X X X X
X X X X Extracts X X X X
....,14,600. The housing loan from UBI was shown in a sum of Rs. 3,43,404. Unsecured loans from relatives and friends were also shown in a sum of Rs. 1,95,100. It was stated by the assessee that the construction was started in the asst. yr. 1992-93 in which investment of Rs. 1,86,800 was made and construction completed in the asst. yr. 1993-94 i.e., under appeal and investment in a sum of Rs. 5,27,800 was made. Thus, the total value of the construction was shown in a sum of Rs. 7,14,600. The assessee was directed to produce the cash creditors, who had advanced loans of Rs. 1,95,100. Certain queries were made from the assessee in which the assessee has also filed the detailed of replies. However, the AO did not believe the construction in the two assessment years i.e., 1992-93 and 1993-94. The AO also disbelieved the loan amount of Rs. 1,95,100. The AO found that the assessee was having bank account No. 978. In this account, maturity of FDR and savings of the assessee as well as subsequent withdrawals were noted. This account was opened on 7th Aug., 1986. The said bank account shows the deposit of Rs. 50,000 on 26th June, 1992, of which the nature and source has not been furnished by th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....um of Rs. 2,10,712. Therefore, the AO has virtually accepted the investment amount in a sum of Rs. 5,30,712 in the asst. yr. 1993-94, therefore, nothing remained unexplained. The learned counsel for the assessee further argued that no proceedings were pending before the AO at the time of referring the matter to the DVO for ascertaining the cost of construction of the building, therefore, reference was invalid and the DVO was not authorised to submit the report under the IT Act. The learned counsel for the assessee relied upon the decision of Hon'ble Supreme Court in the matter of Smt. Amiya Bala Paul vs. CIT (2003) 182 CTR (SC) 489 : (2003) 262 ITR 407 (SC). He has further argued that the AO has not given any reasonable and sufficient opportunity to the assessee to produce the creditors before him. Therefore, no adverse presumption could be drawn against the assessee. The learned counsel for the assessee further argued that the AO has issued invalid notice under s. 147 of the IT Act, therefore, the entire proceedings are illegal. He has also relied upon the decision of Punjab & Haryana High Court reported as Vipan Khanna vs. CIT (2002) 175 CTR (P&H) 335 : (2002) 255 ITR 220 (P&H) a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Income escaping assessment—position prior to 1st April, 1989—Asst. yr. 1986-87—AO made reference to DVO subsequent to completion of assessment and reopened assessment on basis of DVO's report—Whether valuation report is only an opinion of valuer and neither it amounts to 'information' nor can form a ground for reason to believe that assessee had failed to disclose his income fully and truly—Held, yes-whether reopening of assessment was invalid and hence liable to be cancelled—Held, yes." 12. Jodhpur Bench of the Tribunal in the matter of Vijay Kumar held: "Reassessment under s. 147(b)—Information—Valuation report of DVO—Reference under s. 131(1)(d) can be made to DVO only while trying a suit and not in a completed suit—AO was therefore, not authorised to make such reference when the assessments were already completed—Further, report of DVO was just an opinion and could not be used by the AO as information for reopening the assessment—CIT(A) rightly cancelled the reassessments." 13. Nagpur Bench of the Tribunal in the matter of Dr. Arjun D. Bharat vs. ITO (2003) 78 TTJ (Nag) 832 : (2002) 259 ITR 1 (Nag)(AT) held: "Power to issue commission-condition ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e reasons given for the reopening of the assessee/reassessment has only mentioned the report of the DVO, dt. 25th Nov., 1999. The AO was thus, influenced by the report of the DVO, dt. 25th Nov., 1999 and was not having any other material to justify the reasons for reopening of the assessment or for reassessment. The only material available for initiating the proceedings under s. 147 had been the report dt. 25th Nov., 1999 of the DVO. The very basis for initiating proceedings under s. 147 of the IT Act for assessment/reassessment was, therefore, invalid and unfounded opinion of the DVO, which he was not authorised to do so. Therefore, the very basis of initiating proceedings under s. 147 was not in accordance with law. Thus, the report of the DVO cannot form a valid ground for reason to believe that the assessee has failed to disclose her income fully and truly. The assessment order, therefore, suffers from inherent illegalities and is liable to be quashed on these reasons. However, we have considered more facts in this case and found that the Competent Authority/City Magistrate issued notice dt. 8th Feb., 1992 to the assessee to stop construction in respect of the property in quest....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... quash the assessment order in respect of ground Nos. 1 to 8 of the appeal of the assessee. 17. On the second issue, which is so raised in ground No. 9, the AO has made addition of Rs. 50,000 being unexplained deposit in bank account No. 978. The learned counsel for the assessee argued that the proceedings under s. 147 were initiated mainly on account of reference made to the DVO for valuation of construction of building. Therefore, no other addition could be made. He has referred to the decision of Hon'ble Punjab & Haryana High Court in the matter of Vipan Khanna vs. CIT. We do not agree with the submissions of the learned counsel for the assessee. Sec. 147 of the IT Act, which is reproduced above, clearly authorised the AO to make assessment/reassessment of such escaped income and also any other income chargeable to tax, which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section. The language of s. 147 is very specific on this issue. The AO in this case found the unexplained investment in the bank account No. 978 in a sum of Rs. 50,000 on 26th June, 1992, of which the nature and source was not furnished by the ass....