TMI Blog2006 (11) TMI 279X X X X Extracts X X X X X X X X Extracts X X X X ..... . The CIT(A) also failed to take note of the fact that in the letter dt. 22nd Sept., 1999 addressed to Valuation Officer, the AO had requested DVO to estimate the cost of construction without actually mentioning s. 55A anywhere in the paras 1 to 4 of this letter and incorrect mention of s. 56A in the top margin was due to use of wrong proforma and such defect was curable under s. 292B of the Act. 4. The CIT(A) erred in not appreciating the fact that it is open to the AO to seek expert opinion and even in the case of Smt. Amiya Baja Paul vs. CIT (2003) 182 CTR (SC) 489 : (2003) 262 ITR 407 (SC), Hon'ble Supreme Court has observed that AO was not bound by strict rules of evidence and report of DVO could be considered as a piece of evidence. 5. The CIT(A) ought to have appreciated that any irregularity in collecting material/information cannot vitiate the material so collected and same could form basis for issuing notice for reassessment [Thakursidas Banwarilal vs. CIT (1999) 152 CTR (Gau) 302 : (1998) 232 ITR 846 (Gau)]. Accordingly, even if there was irregularity in making reference to valuation office since no proceeding was pending before AO on the date of reference, the repor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gau) 302 : (1998) 232 ITR 846 (Gau). 6. Shri S.N. Puranik, the learned Authorised Representative, reiterated the arguments put forward on behalf of the assessee before the AO and the CIT(A). The submissions made by him are summarized below. - that in the original assessment order passed under s. 143(3), the AO accepted the cost of construction which was supported by books of account and valuation report of an approved valuer. - that in the original assessment order the AO did not point out any defect in the books of account or the valuation report. - that the reference to the Valuation Officer under s. 55A was made by the AO at a time when no proceeding was pending for asst. yr. 1997-98. - that the reference made under s. 55A was bad in law in view of the judgment of the Supreme Court in the case of Smt. Amiya Bala Paul vs. CIT (2003) 182 CTR (SC) 489 : (2003) 262 ITR 407 (SC). - that the initiation of proceeding under s. 147, which was based on the report of the DVO, was bad in law. - that reliance was placed on the decisions in the following cases: (i) Smt. Amiya Bala Paul vs. CIT; (ii) CIT vs. Kalvinator of India Ltd. (2002) 174 CTR (Del)(FB) 617 : (2002) 256 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts of the case, misconceived. He erred in applying the judgment of the Supreme Court in the case of Smt. Amiya Bala Paul, to the facts of the case, at the stage of the assumption of jurisdiction under s. 147. He ignored the observation of the Court appearing at p. 414 as reproduced in para 8 above. 9.2 Where the initiation of proceeding under s. 147 takes place after the expiry of four years from the end of the relevant assessment year, the proviso to the s. 147 is attracted and no action can be taken under s. 147 unless such income has escaped assessment by reason of the failure on the part of the assessee to disclose fully and truly all material facts for his assessment for the assessment year. 9.3 Where, however, the said period of four years has not expired, the conduct of the assessee regarding disclosure of material facts need not be the basis for initiating the proceedings and they can be commenced if the AO has reason to believe that the income has escaped assessment notwithstanding that there was full disclosure of material facts on record. The assessee in such cases cannot defend the initiation of action on the ground that the facts were already placed on record and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot absolutely according to law can be utilized for assessment. There is no direct connection between the assessment of tax and the method by which a document utilized therefor is found out. Illegality of the search does not vitiate the evidence collected during such illegal search. 10. In the present case the proceeding under s. 147 was initiated within four years of the end of the relevant assessment year. The provisions of the proviso to s. 147 were not applicable. The report of the DVO was available before the AO which showed that the investment in the property was Rs. 39,16,200 as against Rs. 28,73,122 shown by the assessee. It was this information which was the basis for the 'reason to believe' on the part of the AO, as appearing in s. 147. It was on the basis of this information that the AO was satisfied and he formed a belief that taxable income had escaped assessment. It amounted to saying that the AO had 'reason to believe' that such income had escaped assessment. The words 'reason to believe' cannot mean that the AO should have finally ascertained the facts by legal evidence. The justification for the AO's belief is not to be judged from the standards of proof required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. Without prejudice to ground Nos. 1 to 5, considering the submissions before the CIT(A), even on merits, Department has no case for alleging any undisclosed investment in construction of hotel, particularly, when cross-objector was entitled to subsidy from Government of Maharashtra. All the submissions before the CIT(A) may please be considered. 7. Without prejudice to grounds above, assessment is also bad in law as AO has not given copy of DVO's report to assessee before completion of assessment." 14. Subsequently, the assessee made a request for admitting the additional ground as under: "1. Valuation report and reference is bad in law and without jurisdiction for: (a) Jurisdiction of valuation of property lies with DVO and not with valuation officer, value as per books and registered valuer's report being above Rs. 25 lakhs. (b) No reference to valuation officer was made for ascertaining cost as of 31st March, 1997. Reference was for 31st March, 1994, 31st March, 1995 and 31st March, 1996. (c) Reference to valuation office was made under s. 55A and since reference is not under s, 142A(1) of the Act, there is no deeming provision to read that reference under s. 55A b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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