TMI Blog1997 (1) TMI 133X X X X Extracts X X X X X X X X Extracts X X X X ..... annulled the ex parte assessment made under s. 144. During the pendency of the said appeal, assessment has been redone for the asst. yr. 1985-86 under s. 143(3) making certain additions under s. 69. Aggrieved by it, the assessee carried the matter in appeal. The learned CIT(A) granted part relief for the asst. yr. 1985-86. As against the said order of the CIT(A), the assessee filed ITA No. 546 and Department filed ITA No. 975/Hyd/1995. Since the ex parte assessment made under s. 144 having been set aside and the assessment for the asst. yr. 1985-86 having been redone under s. 143(3) r/w s. 250 and inasmuch as both Revenue and the assessee are in appeal before the Tribunal as against the part relief granted by the first appellate authority for the asst. yr. 1985- 86, we feel that ITA No. 2021/Hyd/1991 filed by the assessee which arises out of the ex parte assessment made under s. 144 for the asst. yr. 1985-86 has practically become infructuous. Accordingly, ITA No. 2021/Hyd/1991 filed by the assessee is dismissed. 4. Now let us take up the cross appeals ITA Nos. 545 and 546/Hyd/1995 filed by the assessee and ITA Nos. 974 and 975/Hyd/1995 filed by the Revenue for the asst. yrs. 198 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ground that the additions on account of unexplained investment should be considered for the asst. yrs. 1984-85 and 1985-86 only and not for asst. yr. 1986-87. Further, he has also set aside the ex parte assessment under s. 144 made for the asst. yr. 1985-86. Accordingly, the assessment for the asst. yr. 1984-85 was reopened and framed under s. 143(3) r/w s. 147. The period of construction covered by the asst. yr. 1984-85 was only two months while the period of construction covered by the asst. yr. 1985-86 was 9 months. The AO treated the difference between the admitted cost and the cost determined by the valuation cell (Rs. 5,99,620) as unexplained investment and apportioned it between the asst. yrs. 1984-85 and 1985-96 at Rs. 1,09,020 and Rs. 4,90,598 respectively. Thus, the AO framed the assessments for 1984-85 and 1985-86. 6. Aggrieved by the assessments the assessee carried the matter in appeal. The learned CIT(A) by his consolidated order, dt. 9th March, 1995, taking into consideration the cheap cost of labour and material at Alikam village where the mill was constructed, those to reduce the cost of construction by granting a part relief of Rs. 1,88,736. Thus, he determi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cifically mentioned anywhere in the assessment order to the effect that he rejected the books, in fact he impliedly rejected the books and referred the question of valuation to the valuation cell, that the valuation officer made a scientific estimate of the cost of construction and determined the cost which is much higher than the admitted cost, that the assessee could not point out serious defects in the valuation report and, therefore, there are no valid grounds for rejecting the estimate of cost of the construction made by the Departmental Valuation Officer (DVO). Hence, he submits that the learned CIT(A) erred in granting part relief instead of upholding the entire addition. Lastly, he submits that the learned CIT(A) did not give any opportunity of being heard to the Valuation Officer and that in that view of the matter, the Tribunal may remit these appeals to the file of the CIT(A) with a direction to give an opportunity of being heard to the DVO and consider his submissions and then dispose of the appeals. 9. In reply, the learned counsel for the appellant-assessee submitted that when the reference to valuation cell itself without first rejecting the books was not valid, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t cost of construction of the rice mill. No such finding was given by the AO. Nowhere in the assessment order, there is any observation made by the AO to the effect that the books are defective and are, therefore, unreliable and are rejected. Without considering the books and the vouchers and bills filed in support of the entries contained in the books, the AO chose to make a reference to the valuation cell straightaway and obtained a report from the valuation cell regarding the cost of construction and then treated the difference between the admitted cost and the cost determined by the valuation cell as unexplained investment and made the impugned addition. Books of account constitutes the primary evidence. When an assessee maintains regular books of account supported by valid bills and vouchers, some valid reason must be given by the AO for rejecting the cost of construction reflected in the said books and for resorting to an estimate of cost of construction. The first step is consideration of the books of account. The next step of resorting to an estimate comes in only after the books are rejected. Without first rejecting the books the AO cannot straightaway jump to the next ste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss. 69 and 143(3) together, that the ITO must, rather he has a statutory duty to examine the evidence produced by the assessee in support of his cost of construction, viz., the books of account, record a finding about the falsity or unreliability not just by expressing a capricious view, but by pointing out evidence, material and flaws in the evidence, if any. It is only after the evidence is rejected, the ITO will get the power to estimate the cost of construction. It is at that point of time that he can rely upon the report of the Valuation Officer." In the case on hand also, the AO without pointing out any defect whatsoever in the books maintained by the assessee chose to ignore the evidence provided by the entries in the said books and straightaway relied on the valuation report for making an estimate of cost of construction, such a procedure was condemned by the Tribunal in the aforementioned case of Harsarup Cold Storage General Mills. 12. The Rajasthan High Court in the case of CIT vs. Pratap Singh, Amrosh Singh, Rajinder Singh (1993) 200 ITR 788 (Raj) also took the view that the valuation report can be taken into consideration only when the books of account are not re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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