TMI Blog2012 (9) TMI 157X X X X Extracts X X X X X X X X Extracts X X X X ..... ks of account - prior to making the reference to the Valuation Officer, the AO has not ascertained as to what was the defect in the cost of construction disclosed by the assessee in its returns of income - as the AO has not brought any material on record to establish that the assessee had made any unaccounted investment in the construction of the building in question and that the books of account do not reflect the correct cost of construction the reference made to the Valuation Officer for estimating the cost of construction was not Valid - in favour of assessee. - Tax Appeal No.148 of 2000 - - - Dated:- 7-8-2012 - Akil Kureshi and Harsha Devani, JJ. For Appellants: Mr Bandish Soparkar Mr S N Soparkar For Respondents: Mr M R Bhatt, Sr. Adv. Mrs Mauna M Bhatt ORDER Per: Harsha Devani: 1. By this appeal under section 260A of the Income Tax Act, 1961 (hereinafter referred to as 'the Act'), the appellant has challenged the order dated 28th February, 2000 passed by the Income Tax Appellate Tribunal (hereinafter referred to as 'the Tribunal') in ITA No.3055/Ahd/1993. 2. The assessment year is 1989-90 and the relevant accounting period is the year ended on 31s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplicable. The Tribunal ultimately held that the assessee had failed to account for the construction cost in respect of basement and various other items and upheld the addition made by the Assessing Officer as confirmed by the Commissioner (Appeals). 3. While admitting the appeal, this court had, by an order dated 25th September, 2000, formulated the following two substantial questions of law:- 1. Whether, in the facts and circumstances of the case, the ITAT was right in law in holding that the reference made by the respondent to the Valuation Cell for estimating the cost of construction of the building was not invalid? 2. Whether, in the facts and circumstances of the case, the finding of the ITAT that the addition of Rs.5,89,779 as made by the A.O. was correct, is not vitiated by conjectures, surmises and lack of any evidence whatsoever? 4. Mr. Bandish Soparkar, learned advocate for the appellant invited the attention of the court to the assessment order framed under section 143(3) of the Act to point out that the Assessing Officer has categorically recorded that the accounts are duly audited and complete details are available. It was submitted that once the Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s resulting in a difference of more than 30% in the valuation carried out by the approved valuer and the Valuation Officer. Under the circumstances, the facts do not justify interference by this court. It was, accordingly, submitted that the impugned order passed by the Tribunal being just, legal and proper, does not warrant interference by this court. 6. From the facts noted hereinabove, it is apparent that the Assessing Officer made a reference to the Valuation Officer for valuation of the cost of construction of the building constructed by the assessee. Upon receipt of the valuation report, the Assessing Officer noticed a difference of Rs.5,89,779/- between the cost of construction as shown by the assessee and that reflected in the valuation report submitted by the Valuation Officer. He, therefore, after calling upon the assessee to explain the difference, made addition of the said amount under section 69 of the Act as undisclosed investment of the assessee. It may be noted that at the relevant time when the reference was made to the Valuation Officer, there was no statutory provision which empowered the Assessing Officer to make such reference. The Supreme Court in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (27 of 1957). (3) On receipt of the report from the Valuation Officer, the Assessing Officer may, after giving the assessee an opportunity of being heard, take into account such report in making such assessment or reassessment. Provided that nothing contained in this section shall apply in respect of an assessment made on or before the 30th day of September, 2004, and where such assessment has become final and conclusive on or before that date, except in cases where a reassessment is required to be made in accordance with the provisions of section 153A. Explanation.-- In this section, Valuation Officer has the same meaning as in clause (r) of section 2 of the Wealthtax Act, 1957 (27 of 1957). 8. From the language employed in the heading of the section as well as the opening part of the said section, it can be seen that the expression used by the legislature is estimate . Thus, resort can be made to the said provision by the Assessing Officer for the purpose of estimating the value of any investment, bullion, jewellery or any valuable article in the circumstances referred to therein. It is common knowledge that the question of estimate arises only when the book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness of the accounts of the assessee etc., the Assessing Officer can make a best judgment assessment. In other words, before proceeding to estimate the value of any investment the Assessing Officer has to record that he is not satisfied about the correctness or completeness of the accounts of the assessee. 11. At this juncture, reference may be made to the decision of the Uttarkhand High Court in Commissioner of Income-tax v. Bhawani Shankar Vyas, (2009) 311 ITR 8 , wherein the court was dealing with the question as to 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? The court held that where the Income Tax officer while making his assessment had doubts on the correctness of the accounts submitted by the assessee, the Income Tax Officer was perfectly justified in making a reference to a departmental valuer without formally or categorically rejecting the books of account submitted by the assessee. According to the High Court, this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cost of construction as determined by the Valuation Officer and as shown by the assessee. At no stage of the assessment proceedings does the Assessing Officer appear to have mentioned that the books of account are defective or that the cost of construction as shown in the books of account is not the true cost of construction. Thus, while making the reference to the Valuation Officer, the Assessing Officer has not recorded any defect in the books of account nor has he rejected the same. Except for the difference in the estimated cost determined by the Valuation Officer and the actual cost as shown by the assessee, the Assessing Officer has not brought any material on record to establish that the assessee had made any unaccounted investment in the construction of the building in question and that the books of account do not reflect the correct cost of construction. Under the circumstances, there was no occasion for the Assessing Officer to make a reference to the Valuation Officer. As held by the Supreme Court in the case of Sargam Cinema (supra), unless the books of accounts are rejected, the Assessing Officer cannot make a reference to the Valuation Officer. The reference made to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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