TMI Blog2010 (6) TMI 483X X X X Extracts X X X X X X X X Extracts X X X X ..... ent - From the reading of sub-s.(1) of s. 142A, it is clear that the legislature referred to the provisions of ss. 69, 69A and 69B but specifically excluded 69C - In fact during the course of arguments, learned counsel for the assessee produced the assessment order which clearly demonstrates that the expenditure shown by the assessee from the time, when it was an on-going project, was examined and accepted by, the AO - If the intention of the Legislature to include unexplained expenditure as contemplated in Sec.69C of the Act, the provision of Sec.142A should have been specifically mentioning the same – Decided in the favour of the assessee and against the revenue - ITA Nos. 3172 & 3288/Ahd/2009 - - - Dated:- 4-6-2010 - SHRI N.S.SAINI, ACCOUNTANT MEMBER J. AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER J. Assessee by : - Shri Resesh Shah, AR Revenue by: - Shri Jayant Jhaveri , SR-DR ORDER PER Mahavir Singh Judicial Member:- These cross-appeals, one by the Revenue and other by assessee are arising out of the order of Commissioner of Income-tax (Appeals)-II, Ahmedabad in appeal No. CIT(A)-II/CC.2/357/2007-08 dated 16-09-2009. The assessment was framed by the DCIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Rasesh Shah stated that the assessee has filed additional ground vide letter dated 17-04-2010 and the additional grounds are on legal issue. The relevant additional grounds raised are as under:- a) On the facts and in the circumstances of the case as well as law on the subject, the Ld. Assessing Officer has erred in making reference to DVO without calling information from the appellant in regard to cost of construction. The reference was made to DVO on 31.07.07 and notice u/s.143(2) was issued on 01.08.07. The detailed questionnaire was issued later on 09.08.07. The assessing officer has therefore erred in making reference to DVO u/s 142A of the Act when no proceeding for assessment was pending for the year under consideration. b) On the facts and in the circumstances of the case as well as law on the subject, the Ld. Assessing Officer has erred in referring the matter u/s.142A to DVO for the purpose of estimating the value of construction u/s.69C of the Act. The Ld. counsel for the assessee stated that the above stated additional grounds are purely legal, based on the existing facts on the record. He stated that the ground of appeal at Sr. No. (a) was raised before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the issue vide para 4.3 to 4.5 of his order by observing as under :- 4.3 I have considered the facts and the submissions. From the affidavit filed by the AO before the Hon ble Gujarat High Court (copy of which is submitted by the appellant in his paper book), it is evident that although there was no search in the appellant s premises, but there was search at the residence of managing partner who voluntarily disclosed Rs.1 crore in the hands of M/s Rajhans Builders and on that basis, notice u/s 153C of the I.T. Act was issued for Asst. Year 2000-01 to 2005-06. The reference to DVO was made for Asst. Year 2005-06 2006-07 together during the pendency of proceedings u/s.153C of the IT Act for A.Y.2005-06. Thus, there was pendency of proceedings when the reference was made Further, the managing partner had already disclosed Rs 1 crore in his statement, which was sufficient ground for the Assessing Officer to conclude that unaccounted investment is made in the construction and justifying the rejection of books of accounts and making the reference to DVO for the valuation. In view of these facts, it is held that reference to DVO was valid and properly made and the appellant's grounds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p area. Rs.5,69,56,213/- B. Extra Items not included in plinth area Rate. Rs. 94,87,505/- Total Rs.6,64,43,718/- Less: 10% for self supervision purchases. Rs. 66,44.371/- Add. 3% consultation charges for architecture. Rs. 19,93,311/- Net Total Rs.6,17,92,658/- As against this, the appellant has shown cost of construction for A.Y.2005-06 2006-07 taken together at Rs. 5,47,98.948/- resulting into the difference of Rs,69,93,7l0/- for A.Y 2005-06 2006-07 taken together Allocating it between A.Y.05-06 06-07, the allocation for A.Y.06-07 cornes to Rs.43,59,881/- (Rs.69,93,710 x 3.41 crore 547 crore). Accordingly, the addition for unaccounted investment for A.Y.2006-07 is restricted to Rs.43,59,88l/- and the appellant is allowed relief for the balance amount of Rs.1,74,66,224/-. 7. The Ld. counsel for the assessee before us stated that the notice u/s.143(2) was issued on 01-08-2007 and detailed questionnaire was issued on 09-08-2007. He further stated that the Assessing Officer referred the cost of construction to DVO on 31-07-2007 i.e. one day earlier to the date of notice u/s.143(2), even before verifying the books of account regularly maintained and without p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ower than the cost taken by DVO. Ld. Counsel for the assessee stated that DVO has mentioned in his report the cost declared by assessee at Rs.5,655/- per sq.mt. as against Rs.9,320/- per sq.mt. as estimated. Considering 20% variation unit cost of construction will work out to Rs.7,455/-. The Assessing Officer as well as the DVO failed to consider exact cost to be ascertained from checking the detailed construction account. According to him, with anticipated variation assessed cost may work out to Rs.7.19 crore and thus, the 8 DVO has himself indicated hat actual cost will be much less than the estimated by him whereas the Assessing Officer has ignored this comment. The AO has failed to appreciate the fact that the assessee is a builder and engaged in the said business for years together. The addition made on the count that the assessee has shown lower amount of cost of construction, would ultimately resulted into squaring off the whole addition since on one side the addition is made and on the other side the deduction is to be allowed as a business expenditure. Thus the whole exercise would result into Nil. 8. As regards to the other additional ground that referring the matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under:- Estimate by Valuation Officer in certain cases. 142A (1) 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 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. We find from the facts of the case that certain incriminating documents found and seized during the course of search on 07-03-2006 on the group cases, i.e. one of the partner of this assessee-firm was covered under search. Subsequently, notice u/s.153C of the Act was issued for and from assessment years 2000-01 to assessment years 2005-06 vide notice dated 01-08-2007. It is to be noted that no search was conducted in the case of the firm. The Assessing Officer in the present assessment year i.e. 2006-07 notice u/s.143(2) was issued on 01-08-2007 and the cost of construction was referred to the DVO for valuation on 31-07-2007. We find that the assessee is engaged in the business of construction projects and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment , the reference u/s. 142A of the Act can be made. When there is process of assessment, which is initiated after filing of the return of income or issuance of notice u/s. 142(1) and similarly, the process of reassessment could be initiated only after issuance of notice u/s.148(1) after duly fulfilling the formalities mentioned therein, the reference u/s.142A of the Act can be made. It clearly shows that the invoking of Sec. 142A is a process after the initiation of the assessment proceedings. Further, it is mentioned in this Sec. that where estimate of the value of any investment referred to in Sec. 69 is required to be made. This also shows that a reference to DVO u/s. 142A can be made only when a requirement is felt by the AO for making such reference. Requirement would arise or could be felt only when here is some material with the AO to show that whatever estimate assessee has shown is not correct or not reliable. The use of word require is not superfluous but signifies a definite meaning whereby some preliminary formation of mind by the AO is necessary which requires him to make a reference to the DVO us 1422A. It can only be during the course of pendency of assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... :- The short controversy involved in these appeals whether the Assessing Officer can refer any matter for valuation of the property of an assessee though assessment and / or reassessment proceedings are not pending. The Tribunal is of the view that when the assessment proceedings are not pending the Assessing Officer has no jurisdiction and is not empowered to refer any property for valuation to the Valuation Officer. The Tribunal has discussed this issue as under: a-S8 When the process of reopening of assessment ends and the assessment is validly reopened thereafter, the process of making reassessment starts. Therefore, even after the insertion of section 142A, the Assessing Officer should have reason to believe that any income chargeable to tax has escaped assessment as provided u/s.147 and thereafter only the notice for reassessment can be issued u/s.148. Even after the insertion of section 142A there is no amendment in the language of section 147. Therefore, the condition prescribed u/s.147 for reopening of assessment still exists. The Hon ble Gauhati High Court in the case of Bhola Nath Majumdar and the ITAT Jodhpur Bench in the case of Vijay Kumar (supra) have taken th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cases. Even the Hon ble Apex Court has also dismissed the SLP of the Revenue in this case and affirmed the judgment of Hon ble High Court in SLP No. CC 187 of 2007 dated 07-03-2007. As the issue in these appeals of the present assessee before us is exactly identical, what was before the Hon ble High Court in the case of Umiya Cooperative Housing Society Ltd.(supra), respectfully following the same, we are of the considered opinion that the reference u/s.142A of the Act can be made only when the proceedings under this Act is pending and not otherwise. Accordingly, this legal issue, we decide in favour of the assessee and against the Revenue. 13. We further find from the case records that even if a reference u/s. 142A is made by the Assessing Officer on certain consideration such as anything fund during the course of search u/s.132 of the Act or on the basis of a tax evasion petition or a reference is required to be made during the course of other proceedings or a report of the DVO is available to the AO before making an assessment or reassessment then same can be utilized only in accordance with sub-Sec.(3) of Sec. 142A i.e., the assessee has to be given an opportunity of being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred to in s. 69 or s. 69B or the value of any bullion, jewellery or other valuable articles referred in s. 69A or 69B is required to be made. The AO may require the Valuation Officer to make an estimate of such value and report under s. 142A(1), for the purpose of making as assessment under Act, where an estimate of the value of any investment referred to in s. 69A or s. 69B or the value of any bullion, jewellery or other valuable article referred to in s. 69A or s.69B is required to be made, the AO may require the Valuation Officer to make an estimate of such value and report the same to him. Thus the power available under s. 142(1) is requiring the Valuation Officer to value any investment or bullion, jewellery or other valuable article referred in s.69, s 69A or s.69B of the Act,. These powers do not extend to estimate the amount of unexplained expenditure referred in s. 69C of the Act. Admittedly, in the present case the expenditure on construction are claimed and allowed as revenue expenditure and cannot be considered as an investment or bullion, jewellery etc. referred in s. 69, s. 69A or s.69B, of the Act. We accordingly hold that the reference to DVO is not in accordance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment . 13. We cannot agree with this submission of learned counsel for Revenue. Ifinvestments could include within its fold he expenditure as well which is incurred by a businessman during the course of his business, there was no necessity of having a separate provision under s. 69C of the Act which deals width unexplained expenditure and reads as under: 69C. Where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the opinion of he AO satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year. 14. The scope and ambit of ss. 69B and 69C are altogether different. The connotation to the investment appearing in s. 69B has to be in the context of investments made in some property or any other type of investment and it could not be the business expenditure. The word investment contained in s. 69B deals with investment in bullion, jewellery or other valuable articles, etc. if the contention of learned counsel for Revenue is acce ..... X X X X Extracts X X X X X X X X Extracts X X X X
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