TMI Blog2005 (7) TMI 327X X X X Extracts X X X X X X X X Extracts X X X X ..... not brought any material even to dispute the above finding of the ld. CIT(A). Thus, we uphold the order of the ld. CIT(A) in deleting the said addition of Rs. 1,43,098 made by the Assessing Officer. We agree with the ld. AR of the assessee that if the Assessing Officer has made the addition which is not based on sufficient material, the said addition could not be sustained and it would not be prudent for the Tribunal to direct the income-tax authorities to make an inquiry in a particular manner, as the Tribunal is an appellate authority and is required to decide the issue on the basis of the material before it. Therefore, we reject the ground of appeal taken by the Department by confirming the deletion made by the ld. CIT(A) - In the result, the appeal filed by the Department is dismissed. Accountant Member - It is evident that for making assessment, the Assessing Officer is vested with widest power to obtain material for making assessment. If the Assessing Officer relied on such material which was not admissible in law then that would not vitiate the proceedings as this will amount to only irregular exercise of jurisdiction. It is a settled law that under such circumstances the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gly, I am in agreement with the view taken by the ld. Judicial Member. The Hon'ble Vice President, Shri Phool Singh sitting as Third Member, by his opinion dated 6th July, 2005, has concurred with the view of the ld. Judicial Member, who has deleted the addition made by the Assessing Officer in the construction of the flats on the basis of the DVO's report. Therefore, in accordance with the majority view, the issue stands decided in favour of the assessee. Accordingly, the appeal filed by the Department is dismissed. - HON'BLE PHOOL SINGH, VICE PRESIDENT, B.R. MITTAL, JUDICIAL MEMBER AND S.V. MEHROTRA, ACCOUNTANT MEMBER For the Appellant : K.K. Pandey, Adv. For the Respondent : S.K. Garg and Amit Shukla, Advs. ORDER B.R. Mittal, Judicial Member. 1. The Department has filed this appeal for the assessment year 1995-96 against the order of the CIT(A) dated 15-10-1999, on the following ground: That the ld. CIT(A) has erred in deleting the addition of Rs. 1,43,094 as unexplained investment in the construction of flats, without appreciating the act that such addition was made on the basis of valuation report of a technical expert namely valuation office. 2. We have carefull ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh Kumar Agarwal v. Asstt. Director of Income-tax (Inv.) [2004] 269 ITR 388 (All.) that the Assessing Officer under section 131 of the Act does not have the power to refer the matter to the Valuation Officer under section 55A of the Act. He submitted that the Hon'ble Jurisdictional High Court relied on the decision of the Apex Court in the case of Smt. Amiya Bala Paul. The ld. Authorized Representative of the assessee further submitted that the Assessing Officer has not given any reason in rejecting the cost of construction as declared by the assessee in the assessment year under consideration and made the addition merely relying on the DVO's report, which, in view of the above decision could not be considered as the said report was not legally obtained. In reply to, query from the Bench as to whether the matter could be restored back to the Assessing Officer for his verification, as he has not considered the issue of investment at the time of assessment proceedings, the ld. Authorized Representative of the assessee submitted that it would amount to giving an another opportunity to the Assessing Officer to make a de novo inquiry in respect of the matters, which have not bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... struction as the said report, in view of the above decision of the Apex Court, cannot be said to be a valid report. The Hon'ble Jurisdictional High Court in the case of Dr. Avinesh Kumar Agarwal has also held that the Assessing Officer does not have the power to refer a matter to the Valuation Cell under section 55A of the Act for making investigation under section 131(1)(d). Since the Assessing Officer merely made the above addition of Rs. 1,43,094 based on the DVO's report, which, in view of the above decision could not be relied upon, we hold that there is no material on record to sustain the addition made by the Assessing Officer. Moreover, we observe that the ld. CIT(A) has considered the cost of investment in the property in question, in the light of the DVO's report and has found that the difference in the cost declared by the assessee and the cost estimated based on DVO's report is less than 10 per cent after considering the objection of the assessee and as such the same is to be ignored. The ld. D.R. has not brought any material even to dispute the above finding of the ld. CIT(A). In view of the above, we uphold the order of the ld. CIT(A) in deleting the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .'s report for making the addition and did not consider the cost of investment in the property independently. There is no dispute that in view of the decision of Apex Court in the case of Smt. Amiya Bala Paul, the addition made on the basis of D.V.O.'s report cannot be sustained. However, I am not in agreement with the learned Judicial Member on the issue of restoring the matter-back to the file of the Assessing Officer for fresh verification of the cost of construction. Admittedly at the time when reference was made to D.V.O., the decision of Hon'ble Supreme Court was not there and, therefore, adopting the normal procedure in vague of making reference to D.V.O., Assessing Officer referred the matter to D.V.O. In my opinion the reference to D.V.O. will amount to irregular exercise of jurisdiction and has to be corrected from the stage at which the irregularity was committed. 2. Section 143 does not define the word 'material'. The Assessing Officer not being a Court can rely upon material, which may not strictly be evidence admissible under the Indian Evidence Act for the purposes of making an order of assessment. Hon'ble Delhi High Court in Addl. CIT v. Jay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 43 (Luck.) of 2000] assessment year 1984-85 in para 6 has observed as under: The moot point for consideration is whether the assessment order passed on the basis of an inadmissible evidence can be said to be a nullity in law and, accordingly, required to be annulled or it is merely an irregularity which can be set right by setting aside the assessment order with the direction for removing the said irregularity by adopting proper course of law. It is well-settled that an order can be annulled only if it is passed for want of pecuniary or territorial jurisdiction or on account of lack of jurisdiction over the subject-matter per se. However, if the authority is vested with the power of passing an order while exercising its legally vested jurisdiction relying on an inadmissible evidence, the whole order cannot be said to have become a nullity under law. It is a case of irregular exercise of legally vested jurisdiction. 6. Hon'ble Supreme Court in case of CIT v. Assam Travels Shipping Service [1993] 199 ITR 1 while considering the power of remand of the Tribunal when the Assessing Officer had imposed for less penalty than that was leviable held that though Tribunal has no right t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecord, I did not find much difficulty in agreeing with the view that the expenses disclosed by the assessee cannot be said to be insufficient or inadequate particularly compared to the household drawings shown in the earlier years and the income assessed of the assessee. 9. Therefore, this decision in my opinion is of not much assistance to assessee. Hon'ble Supreme Court in case of Kapurchand Shrimal v. CIT [1981] 131 ITR 451 has held that the orders of assessments are liable to be set aside but the Tribunal should direct the ITO to make fresh assessments in accordance with law: It is well-known that an appellate authority has the jurisdiction as well as the duty to correct all errors in the proceedings under appeal and to issue, if necessary, appropriate directions to the authority against whose decision the appeal is preferred to dispose of the whole or any part of the matter afresh, unless forbidden from doing so by statute. 10. Respectfully following the decision of the Hon'ble Supreme Court I direct the matter to be restored back to the file of the Assessing Officer for fresh examination of the case of investment in building without taking into consideration the D.V.O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer noted that assessee-company has shown work-in-progress atRs. 5,02,144 and further perused that assessee-company had shown cost of construction incurred by it in raising the said construction. The Assessing Officer noted that he had issued a commission on 16-12-1996 to the District Valuation Officer (in short 'DVO') to evaluate the extent of investment made in the construction of property at Khurram Nagar by the assessee-company with year-wise breakup and DVO submitted his report dated 28-10-1997 in which he had given the cost of construction incurred by the assessee from December 1994 to March 1997 at an amount of Rs. 4,70,40,000 as against declared cost of construction at Rs. 3,66,07,977 by the assessee-company. As per year-wise breakup, assessee had shown cost of investment in the year under consideration at Rs. 5,02,144 and the DVO had estimated the cost of construction in the year under consideration at Rs. 6,45,238. The Assessing Officer called upon the assessee to explain the difference of investment as declared by it and as given by the DVO. The assessee has also furnished report of the Registered Valuer who has declared total cost of investment til ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstruction has added 2 per cent for builder's efforts while 10 per cent is normally accept ed norms and if that is deducted, addition will be less than 10 per cent of the total cost and same can easily be ignored and he deleted the addition. 6. The Department came in appeal. 7. The ld. Judicial Member, after considering arguments of the parties, concluded that the Assessing Officer was not justified in making reference to the DVO and that reference was invalid in view of the decision of the Apex Court in the case of Smt. Amiya Bala Paul and same view was taken by the jurisdictional High Court in the case of Dr. Avinesh Kumar Agarwal. Further, the ld. Judicial Member has also took into consideration the submission of the ld. D.R. that if DVO's report is treated as invalid, then matter may be restored back to the file of the Assessing Officer for deciding the issue of actual investment in the construction of flats. The ld. Judicial Member, after placing reliance on the decision of ITAT, Allahabad Bench in the case of Raj Kumar Jain, noted that the only course open to the Tribunal is to delete the addition if there was no material on record which justify the addition. The del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to pickup a word, a clause or a sentence occurring in the judgment of the Apex Court, divorced from its context, as containing a full exposition of the law on a question when the question did not even fall to be answered in that judgment. The ld. counsel for the assessee submitted that the decision of the Hon'ble Supreme Court of India in the case of Assam Travels Shipping Service was considered by the Third Member in the case of Raj Kumar Jain and it was concluded that it is not for the Tribunal to start investigation suo motu and supply the evidence for the Department if the additions are not supported by evidence. The only course left open to the Tribunal is to delete the addition pointing out how addition made could not be sustained for want of adequate supporting material. The basis for this observation was that it is for the Department to gather material and make proper assessment and the Tribunal is not in that fashion an income-tax authority. The Tribunal cannot order further enquiries with a view to sustain addition because that will amount to taking sides with the parties which is not the function of the judicial authority like the Tribunal. 11. Relying upon the abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the view of the Tribunal deleting the addition based on the report of DVO was found sustainable. If these are the facts, then addition was to be deleted as done by the ld. Judicial Member. 16. Apart from it, the ld. CIT(A) had given a categorical finding that assessee was maintaining books of account as per Companies Act which were audited also. The Assessing Officer has not pointed out any defect in the books of account which were duly supported with vouchers, etc. The ld. DR has also not brought anything on record to show that books of account suffer from any defect. If these are the factual position, then cost of construction declared by the assessee is duly supported by books of account and relevant vouchers and further the Department has also not brought anything on record to show that there may be justification for restoring the matter back to the file of the Assessing Officer. No doubt, the decision of the Hon'ble Supreme Court of India in the case of Assam Travels Shipping Service is there describing the powers of the Tribunal to send the matter back to the file of the Assessing Officer, but one has to see the contest in which the ratio was rendered by the Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fresh inning in the absence of any material brought on record by the Departmental authorities. The scope of the Tribunal has been specifically defined and last observation is very material in which it has been opined by the Third Member that the Tribunal cannot order further enquiry with a view to sustain addition. 19. After considering all the factual position as noted above, I may also observe that no doubt the ld. Accountant Member has restored the matter back to the file of the Assessing Officer, but no guidelines have been given to the Assessing Officer, how he will be collecting evidence, particularly when books of account of the assessee-company were being maintained as required under the Companies Act and the same were duly audited. Admittedly, no defect has been pointed out in the books of account and cost of construction returned by the assessee was found duly supported by relevant vouchers and documentary evidence. Apart from it, the assessee has also filed report of the Registered Valuer who has also given cost of construction which is approximately same as returned by the assessee-company. It is to be noted that report of the Registered Valuer is also an important pie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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