TMI Blog2014 (9) TMI 496X X X X Extracts X X X X X X X X Extracts X X X X ..... l Gulati vs Union Of India And Anr. [2004 (4) TMI 45 - ALLAHABAD High Court] the CIT(A) had no jurisdiction in appeal proceedings to call for a valuation report, which is the exclusive prerogative of the AO. Reference u/s 142A is not allowed after assessment or re-assessment - The AO has no jurisdiction to invoke section 142A after assessment or re- assessment - the CIT(A) also ceases to have any jurisdiction to press sec. 142A into service either himself directly or indirectly through the AO -the basic pre-requisite of sec.142A is satisfaction of the AO - When the AO makes a reference at the behest of the CIT(A), the valuation report so obtained has no legal validity and has to be ignored - as the assessment is already completed, the AO has no jurisdiction to make the reference u/s. 142A of the Act - the CIT(A) has clearly overstepped his jurisdiction and hence the order of enhancement by the CIT(A) has no legal sanction – Decided in favour of assessee. Undisclosed investment determined by AO – Amount added to cost of construction of hospital building - Held that:- Identity of the creditor, the creditworthiness of the creditor and genuineness of the transaction are proved by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was looked after by her husband and her father. The husband of the assessee made a statement that the books have been lost and only a ledger extract of the construction account for FY 2002-03 was available and beyond that no details of construction account were available. The assessee had submitted that the construction of Vikram Hospitals in Madhapur was started during the FY 2002-03 and the completed in FY 2003-04. The hospital was inaugurated in the month of January, 2004. 4. The Assessing Officer disagreed with the cost of construction shown by the assessee and by taking into account comparable cases, worked out the actual cost of construction at ₹ 80,45,650 and made an addition of ₹ 15 lakhs by giving the following reasons: 3.7 The assessee furnished a reply dated 23.12.2006 stating that the cost of construction declared by her is ₹ 63,99,186/- including building of ₹ 56,58,839/- and electrical fittings of ₹ 7,40,347/-. She further claimed that out of the total plinth area of 19,807 sq. ft. the basement occupies 3470 sq. ft. and the cost of construction of the basement cannot be at par with other areas. She stated that the cost of basement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iated. 5. Aggrieved, the assessee preferred an appeal before the CIT(A). 6. The assessee argued before the CIT(A) that the Assessing Officer had arbitrarily rejected the valuation done by the assessee and the Assessing Officer has not found any mistake in the valuation report of the valuer consulted by the assessee. The CIT(A) vide letter dated 12.2.2008 referred the case to the Assessing Officer for a Remand Report to be submitted after getting the valuation of the hospital done from District Valuation Officer and also gave a direction that the report should be properly confronted by the assessee. 7. The Remand Report along with the valuation report made by the Chief Engineer in charge of valuation was submitted to the AO on 1st October, 2013 after confronting the assessee. The entire report was sent to the assessee who gave her counter submissions. The issue of enhancement of income emanating out of the enhanced valuation by the Chief Engineer was also confronted to the assessee. The CIT(A) observed from the DVO's report that the 4th floor was constructed after December, 2006 and, therefore, it should not be taken into account for this assessment year. The official ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) pointed out that no details have been provided and absolutely no evidence has been provided regarding this story. The CIT(A) agreed with the Assessing Officer that the father of the assessee does not have any other source of income and this amount of so called withdrawals had definitely been used for the purpose of his personal household expenses over nearly two years. Thus the CIT(A) held that the fact is further proven by the conclusive evidence wherein just before issue of cheque an amount of ₹ 3.3 lakhs which is much more than the cumulative withdrawals of the last two years had been deposited. The CIT(A) held that it is very clear from the above that the transaction is not genuine and section 68 of the Act has been rightly applied in the case of the assessee. Accordingly, he sustained the addition made by the Assessing Officer. 11. The next ground of appeal before us relates to the addition of ₹ 1,26,185 given by the husband of the assessee. During the appeal proceedings the assessee agreed that she had voluntarily admitted to the disallowance of ₹ 6 lakhs, but at the same time the assessee could not explain the difference of ₹ 1,26,185/-. Follow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on made pursuant to such fresh evidence is legally not sustainable. (iv) The learned CIT (Appeals) erred in directing the Assessing Officer to make a reference to the Valuation Officer while calling for a remand report, which in law he is not entitled to do. The addition sustained and enhancement made to the cost of construction based on the DVO's report is bad in law. (v) The learned CIT (Appeals) overlooked the fact that only the AO could make a reference to the Valuation Officer in terms of section 142A of the JT Act and that too for the purpose of making an assessment or reassessment consequent to which no reference was permissible after the assessment was made. Thus, the learned CIT (Appeals) grievously erred in directing the AO to make a reference ignoring the provisions of law in this behalf. Consequently, the addition sustained and enhancement made to the cost of construction based on the ova's report are devoid of any merit. (vi) The learned CIT (Appeals) erred in calling for the report of the Valuation Officer while under section 142A the AO alone could do this if he was satisfied that the cost of construction was under stated or suppressed and where a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eason able and highly excessive. (viii) The learned CIT (Appeals) erred in not realising that the cost arrived at by the DVO included. The cost of water softener, diesel generator set, air conditioning and the lift aggregating to ₹ 25,80,000. A sum of ₹ 24,67,271 was separately incurred by the appellant towards the aforesaid items and this cost was in addition to the cost construction admitted. Consequently, the cost of construction in the DVO's report was excessive by ₹ 25,80,000 on this count alone (ix) The learned CIT (Appeals) deducted the cost of the fourth floor from the DVO's report since the same did not exist during the year but erred in not deducting proportionately the cost of services added in the report. 4. The learned CIT (Appeals) erred in confirming disallowance of depreciation on office equipment at ₹ 7,123, hospital equipment at ₹ 3,724 and computers at ₹ 2,260 on the ground that the purchases were not substantiated. 5. The learned CIT (Appeals) erred in confirming the addition of ₹ 1,26,185 despite leading evidence that the amount was paid by the appellant's husband. 6. The learned CIT (Appeals) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is already completed, the AO has no jurisdiction to make reference u/s 142A. Likewise, if the AO has not arrived at a finding that there is undisclosed investment, section 69 cannot be invoked in which case reference u/s 142A is automatically ruled out. 16. The AR stated that in the case of the assessee, the AO had concluded the issue by making a detailed discussion before arriving at addition of ₹ 15 lakhs as undisclosed investment u/s 69. Further the AO referred to a few comparable cases and the AO consulted SE (Valuation). It was submitted that when the assessee preferred an appeal against this addition, the CIT(A) ought to have confined to the merits of this addition. Instead the CIT(A) asked the AO to refer the matter to the Valuation Officer and after obtaining a report from the DVO the CIT(A) made enhancement. It was submitted that, in other words, the CIT(A) issued a direction to the AO to make a reference u/s 142A and acted upon the report obtained thereafter and in view of the specific language of sec. 142A, the CIT(A) clearly overstepped his jurisdiction. The counsel relied on the following decisions for the proposition that the valuation report was invalid: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee had actually been paid as consideration. The condition precedent for making a reference to the DVO by invoking the provisions of section 142A thus was not satisfied in the present case and neither the said reference nor the addition made on the basis of report obtained from the DVO in response to the said reference, in our opinion, was sustainable in law as rightly held by the learned Commissioner of Income-tax (Appeals). In the case of Subhash Chand Chopra v. Asst. CIT [2005) 92 TTJ 1087, this Bench of the Tribunal has held that no material or evidence having been recovered during the course of search showing investment in construction, the Assessing Officer was not competent to make a reference to the DVO under section 142A and to make addition on that basis. (v) In CIT v. Kalaivani (2008) 296 ITR 515 (Mad) addition of investment in a commercial complex was deleted because it was based on the report of the DVO without any supporting material. (vi) In CIT v. Suraj Devi 328 ITR 604 Del, the High Court referred to the judgment in K. P. Varghese v. ITO [1981] 131 ITR 597 (SC) and reiterated that it is settled law that the primary burden of proof to prove underst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... information on the basis of which it could be said that the cost of construction shown by the assessee was understated or anything above what was disclosed by the assessee. In terms of sec. 142A of the Act, reference to the DVO can be made only when a requirement would arise or could be felt when there is some material with the AO for making such reference and such requirement would arise or could be felt only when there is some material with the AO to show that whatever estimate the assessee has shown is not correct or not reliable. The use of the word 'require' is not superfluous but signifies a definite meaning whereby some preliminary formation of mind on objective basis by the AO is necessary, which requires him to make a reference to the DVO under section 142A. (ix) In Girdhar Gopal Gulati v. UOI (2004) 269 ITR 45 (AIl.), the High Court held that where an assessment was completed after detailed enquiry U/S 143(3), valuation report obtained subsequently by the AO cannot justify action U/S 263. (x) In Elel Hotels Investments Ltd. v. CIT (2005) 2 SOT 659 (Mum.), it has been held that the CIT(A) does not get jurisdiction to do certain acts for which the AO did no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer to redetermine the value of the property after referring the matter to the valuation cell? 18. We have heard both the parties. Section 142A is as under: (i) For the purposes of making an assessment or reassessment under this Act, where an estimate of the value of any investment referred to in section 69 or section 69B or the value of any bullion, jewellery or other valuable article referred to in section 69A or section 69B [or fair market value of any property referred to in sub-section (2) of section 56] is required to be made, the Assessing Officer may require the Valuation Officer to make an estimate of such value and report the same to him. 19. The decision relied on by the learned DR in the case of Prasad Productions Pvt. Ltd. (supra) is not applicable to the facts of the present case since in that case, the AO had not accepted the assessee's valuation of plots owned by it but had made an estimate of the same and on appeal, the assessee urged that the WTO should be directed to refer the valuation of the said property to the valuation cell. The CIT(A) accepted the contention of the assessee and directed the Assessing Officer to get valuation done by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... truction of the hospital. She noted that the plinth area of the property was 19807 sq. ft. In para 3.4, the AO noted that bills/vouchers impounded during the survey were verified with the ledger account of building construction account and observed that out of ₹ 56,58,839 claimed as cost in building a/c, the assessee was unable to produce bills/vouchers for ₹ 23,45,667. The AO noted that the cost of construction as per the assessee worked out to ₹ 286 per s. ft. whereas as per the approved valuer's report it was ₹ 301 per s. ft. In para 3.5 of the assessment order, the AO observed that the cost shown by the assessee was low. She noted that the cost was not less than ₹ 400 to ₹ 450 per s. ft. She also consulted the SE (Valuation) who also confirmed the cost of construction was ₹ 400 in F.Y. 2002-03 and ₹ 450 next year. She relied on some comparable cases also. Then she issued a show cause notice asking the assessee to state her objections to adopt the cost of construction at ₹ 450 per s. ft. Para 3.7 of the assessment order refers to the assessee's reply wherein she stated that out of plinth area of 19,807 s. ft. basement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a copy of account of assessee's husband was submitted as per which he made payments on her behalf to Margadarsi Chit fund, etc., which was transferred by a journal entry. The CIT(A) held that the assessee had given the same explanation in the assessment proceedings which was not satisfactory and confirmed the addition of ₹ 1.26 lakhs. The learned counsel stated that the Revenue authorities cannot expect the source of source to be established. 27. We have heard both the parties. Identity of the creditor, the creditworthiness of the creditor and genuineness of the transaction are proved by the assessee and hence the assessee has discharged her onus. Relying on the decision of the jurisdictional High Court in the case of R.B. Mittal (243 ITR 283) we are of the opinion that this addition is to be deleted as the assessee had satisfactorily proved the criteria laid down in the Supreme Court decision. 28. The next ground relates to the addition of ₹ 3.30 lakhs. The AO held that the credit was not proved and the CIT(A) agreed with the AO observing that the transaction was not genuine. Before us the learned counsel for the assessee reiterated the argument as in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound No. 1 is general in nature and ground Nos. 5 and 6 have not been pressed by the assessee. Accordingly, these grounds are dismissed. 33. Ground No. 2 is with respect to the addition of ₹ 3.20 lakhs. The assessee has received this amount by cheque from her father. The CIT(A) confirmed the order of the Assessing Officer in holding that the transaction is not genuine. On appeal, it was submitted before us that the identity and creditworthiness of the creditor and genuineness of the credit were proved. Further it was submitted that the assessee had admitted in a sworn statement at the time of survey that her husband and her father are looking after the financial matters. 34. We find that her father Sri Vara Prasada Rao has filed a confirmation letter before the Assessing Officer. It has been stated by him that he has retired as Dy. General Manager from Power Grid Corporation in June 2002 and that he received the retirement benefits of ₹ 12,76,876. Shri Vara Prasada Rao had also stated that he had withdrawn the amount earlier and had given it to persons who had asked for some finance and later when his daughter wanted finance for construction of the hospital buildi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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