TMI Blog2003 (11) TMI 309X X X X Extracts X X X X X X X X Extracts X X X X ..... epartment had seized the books of account and other relevant records of the business of the assessee. After search, the Dy. CIT, Special Range I, Lucknow, who was authorised to complete assessment in respect of the assessee, issued a notice under s. 148 of the Act on 12th Feb., 1993, for asst. yr. 1989-90, copy appearing at p. 68 of the paper book and also issued a notice under s. 142(1) of the Act on 5th July, 1994, copy appearing at p. 69 of the paper book, calling for the necessary information in respect of asst. yr. 1989-90. It is also on record that after making proper enquiries, the AO dropped the notice issued under s. 148 of the Act by passing an order on 7th March, 1995, copy of which is appearing at page No. 70 of the paper book. 3. For asst. yr. 1990-91, the assessee filed return of income on 18th July, 1992 and income returned was Rs. 1,49,710. It is admitted fact that the assessee filed copies of balance sheet, P L a/c and all relevant facts relating to construction of building "Rohit Bhawan" upto 31st March, 1990 and the AO, who is again same, Shri Sudhakar Tiwari, Dy. CIT, Special Range I, Lucknow, completed assessment on 30th March, 1993, under s. 143(3) of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence its consideration by the AO in the assessment order dt. 31st march, 1994 or papers available in the records of the relevant year. A few details found after the assessment gave a basis to correctly ascertain the cost of construction of the said complex. Therefore, it was decided to refer the matter to the District Valuation Officer under s. 131(1)(c) of the IT Act. The DVO had taken a few details from the assessee and a few collected by him on the spot measurement to note the quality of construction and also the period of construction. His report dt. 21st March, 1996, was submitted to the AO; as per report cost of investment in the said complex is Rs. 1,97,64,300 with reference to the covered area of 7,785 sq. mtrs. in the periods relevant to asst. yrs. 1989-90 to 1992-93. The DVO refers to the admitted cost of Rs. 1,01,95,000 by the assessee before him, although no such admission or details in respect thereof were given at the assessment stage. Without prejudice to the resources of admitted cost of investment in the absence of such details on the record, the following year-wise difference emerged between the admitted cost and the determined cost as per DVO. Finance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Rs. 14,55,810, respectively. 7. The assessee preferred appeals and in asst. yr. 1989-90, the assessee challenged the notice under s. 148 of the Act, which was solely based on the report of the DVO. The other plea of the assessee was that the assessment for asst. yr. 1989-90 was over by issuing intimation under s. 143(1)(a) of the Act and even thereafter, the AO reopened the case of the assessee for asst. yr. 1989-90 by issuing a notice under s. 148 of the Act, but after making necessary inquiry, the AO did not find any substance to proceed with and filed the proceedings for asst. yr. 1989-90. The third plea of the assessee was that there was no proceedings pending before the AO when he made reference to DVO under s. 131(1)(d) of the Act. All these legal pleas were considered and learned CIT(A) did not find substance and rejected the same. After the learned CIT(A) proceeded to decide the issue on merit and after considering all the factual positions regarding objection of the assessee against estimate arrived at by the DVO, the learned CIT(A) gave some relief and decided the appeal vide order dt. 28th March, 2002, which is challenged by the assessee in ITA No. 654/Luc/2002. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sdiction of the AO. The different Benches of the Tribunals following the analogy of the different Hon ble High Courts referred to above have also decided the issue in favour of the assessee by observing that the s. 131(1) of the Act gives powers to the AO or other authority, which are vested in a Court, but when Court is trying the suit and similar analogy will be applicable to the AO as the AO can exercise the power under s. 131(1) of the Act, when there is pendency of any proceedings before him. The AO cannot exercise the power under s. 131(1) of the Act before or after conclusion of the proceedings. On the basis of above analogy of law as laid down by different High Courts as well as by different Benches of the Tribunals, the learned counsel submitted that the AO was not justified to make reference when nothing was pending in respect of asst. yrs. 1989-90 to 1991-92. 11. The next plea raised by the learned counsel for the assessee is that the assessee was engaged in the business of construction of multi-storeyed complex and was maintaining books of account duly supported with vouchers. The assessee had been filing returns of income along with all necessary documents. The AO co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v Engg. Works vs. ITO (1990) 53 Taxman 109 (Jp) in which Tribunal Jaipur Bench on identical facts held that the AO was not justified to make reference to DVO without pointing out defects in the books of account. Other decision has also been referred to on the same point including the decision of Tribunal Allahabad Bench A, in ITA Nos. 2137 to 2139/All/1989 in the case of ITO vs. Smt. Parveen Bari, for the asst. yrs. 1984-85 to 1986-87 decided on 29th Feb., 1996, the copy is appearing at pp. 115 to 117 of the paper book, which is also on the same line. The other decision referred to by the learned counsel is Tribunal, Lucknow Bench, in the case of Dy. CIT vs. Janki Prasad Garden Enclave (P) Ltd. in ITA No. 54/All/1999 decided on 28th Feb., 2003, the copy of which is appearing at pp. 135-136. 13. On the basis of these facts, the learned counsel for the assessee submitted that the AO admittedly had not rejected books of account, rather assessments were completed under s. 143(3) in respect of these assessment years before us and without rejecting the books and without recording a prima facie finding that the assessee had understated the cost of construction, the AO cannot make refere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able question of law arises. 15. The learned counsel submitted that above analogy is fully applicable to the facts of the case. The learned counsel also referred to the decision of Tara Chand Mundhra vs. Union of India (2000) 163 CTR (Raj) 631, in which their Lordships have laid that report of the valuer cannot singly be made basis of information as required under s. 147(b) of the Act to issue notice under s. 148 of the Act. The learned counsel submitted that, no doubt, this is in respect of old provisions of s. 147, but fact remains that the AO has to record reasons to believe and this belief must be based on material, and in the case in hand, the report of the DVO alone was there and as pointed out above, the learned counsel submitted that the said report is not to be looked into as very action of making reference is not in accordance with law. The learned counsel also pointed out that admittedly reference made by the AO to DVO, Kanpur, was under s. 131(1)(d) as evident from the copy of valuation report appearing from pp. 63 to 73 and the Hon ble Supreme Court of India in the case of Smt. Amiya Bala Paul vs. CIT (2003) 182 CTR (SC) 489 : (2003) 130 Taxman 511 (SC), had laid dow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rposes of this Act, have the same powers as are vested in a Court under the Code of Civil Procedure, 1908 (5 of 1908), when trying a suit in respect of the following matters, namely: (a) discovery and inspection; (b) enforcing the attendance of any person, including any officer of a banking company and examining him on oath; (c) compelling the production of books of account and other documents; and (d) issuing commissions." 21. The law as laid down by the different High Courts is quite specific on this point that the AO has no authority to issue the commission to DVO or to any one, if no proceeding is pending before him. In the case of Dwijendra Lal Brahamchari Ors. vs. New Central Jute Mills Co. Ltd. Anr., the Hon ble Calcutta High Court was seized with the issue relating to powers of the ITO under s. 131 of the Act and their Lordships have laid down that powers of ITO under s. 131 are co-extensive with that of a Court trying a suit under s. 30 of CPC r/w rr. 12, 14 and 15 of Order 11 of the Court. The officer can summon any document, if any suit is pending before him and not otherwise. This view was approved by Hon ble Bombay High Court in the case of Jamnadas Madha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vant documents viz., balance sheet, P L a/c and other vouchers etc., along with the return for asst. yrs. 1989-90 to 1991-92 and assessment had been completed. The learned counsel also submitted that in asst. yrs. 1990-91 and 1991-92 addition of Rs. 2,20,994 was made by the AO respectively on the basis of seized books of account regarding the construction of Rohit Bhawan. It means the AO had already applied the mind while making the addition, which was also subject matter of appeal before the CIT(A). 25. The contention of the learned counsel is that unless and until the AO has not pointed out any other defect, he was not justified to make reference to DVO and that contention of the assessee is getting corroboration from the view by the Hon ble Rajasthan High Court in the case of CIT vs. Shri Pratap Singh, Amro Singh's. Rajendra Singh and the same view was also taken by the different Benches of the Tribunals referred to by the learned counsel and particularly in the case of Modern Construction Development Project Promotion vs. Asstt. CIT (1997) 63 ITD 235 (Cal). Further, the Hon ble Madhya Pradesh High Court in the case of CIT vs. S.R. Construction has laid down as under: "Pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned counsel is about reopening of the proceedings. The AO had already considered all the factual positions in the assessment so completed and there was no fresh material except the report of DVO with him. We have already concluded that the step of the AO to make reference under s. 131(1) of the Act without pendency was invalid and this evidence collected by the assessee is not justifiable. 29. In this connection, it is also relevant to point out that the learned CIT(A) while deciding these legal points had relied upon the decision of apex Court in the case of Pooran Mal vs. Director of Inspection (Investigation) 1974 CTR (SC) 25 : (1974) 93 ITR 505 (SC) and that of CIT vs. Dr. Nandlal Tahiliani (1988) 172 ITR 627 (SC) to substantiate the plea that even if the step of the AO was not justified to make the reference to DVO, the evidence so collected is admissible. That reasoning laid down by their Lordships was in respect of the material, which was seized during the search operation and their Lordships concluded that the Department cannot be prohibited from using such material. The position would have been different in case of the assessee certain incriminating documents leading to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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