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TMI Blog2009 (12) TMI 633X X X X Extracts X X X X X X X X Extracts X X X X ..... x (Appeals) has erred in upholding the additions made by invoking the provisions of section 142A despite the fact that the property was duly recorded in regular books of account. (4) That the learned Commissioner of Income-tax (Appeals) has erred on facts and in law in comparing the instance of remote areas and not considering the instances of same locality duly placed on record. (5) That the learned Commissioner of Income-tax (Appeals) has erred on facts and circumstances of the case in sustaining an addition calculated in an arbitrary manner. (6) That the impugned appellate order is arbitrary, illegal, bad in law and in violation of rudimentary principles of contemporary jurisdiction. 3. The only issue for consideration relates to confirming the addition under section 69 on the basis of valuation done by the Departmental Valuer under section 142A of the Act. The facts of the case, stated in brief, are that assessment under section 143(3) was completed on March 29, 2006 at an income of Rs. 18,054. During the year under consideration, the assessee purchased the first floor along with 40 per cent. of ownership rights in property No. A-2/43 Rajouri Garden, New Delhi for a sum of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cations. The property was centrally located and, therefore, could not be purchased at such a low rate. It was also contended by the assessee that the property referred to the Valuation Officer was part of "stock-in-trade" of the assessee and, therefore, did not represent any investment. The provisions of section 142A do not give any power to the Assessing Officer to refer the matter for valuation of any expenditure incurred by the assessee as the assessee has incurred expenditure in purchase of the property and not as investment. This contention of the assessee was rejected by the Assessing Officer by observing that the submission made by the assessee was totally misleading and restricting the power of the Assessing Officer because section 142A was very wide and the Assessing Officer could refer the matter to the Valuation Officer for estimate of value of any investment referred to in section 69 or 69B or value of any jewellery and other valuable articles referred to in section 69 or 69B. He was of the opinion that the Assessing Officer could refer the matter to the Valuation Officer for determining the undisclosed consideration paid for acquiring the same. Accordingly, the Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s pleaded that the assumption of jurisdiction was defective which could not be cured. 7. It was also submitted that the assessee had submitted that as per the registered valuer the fair market value of the property was at Rs. 24,50,000. Further, the provisions of section 69 and section 142(1) clearly indicate that the provisions of section 142A can be invoked only when investments are not recorded in the books of account maintained by the assessee. In this case, the proper books of account were maintained and investments in the property was duly recorded in the books of account, therefore, the provisions of section 142(1) were not applicable. 8. The learned Commissioner of Income-tax (Appeals) considered the submissions made by the assessee. The learned Commissioner of Income-tax (Appeals) was of the opinion that for initiating reassessment proceedings there could be some information in the possession of the Assessing Officer in order to come to a prima facie belief that there was escapement of income. Sufficiency of such material/information could not be called upon to question in appeal proceedings. At the time of initiation of reassessment proceedings, the Assessing Officer ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome-tax (Appeals) further noted that section 142A could be invoked whether understatement was for investment purpose or for "stock-in-trade". There was no differentiation made in the Act about reference to the District Valuation Officer. The only requirement was the existence of any valuable article or thing which either undisclosed or partially disclosed in the books of account. In the case of the assessee there was no dispute about the existence of property and the same was not disclosed fully which was evident from the facts of understatement of built-up area of construction. While working out the fair market value of the property acquired by the assessee, the District Valuation Officer had adopted comparative sale instance method. In respect of comparative sale instance of property, the District Valuation Officer has taken sale instance of property located in nearby area and adjusted the value based on advantages and disadvantages attached to the property. The sale instance of the property taken up for comparison was approved by the Income-tax Department (Appropriate Authority) as the said property was sold on August 16, 1999 for a consideration of Rs. 1,90,00,000. It was a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrived at by the District Valuation Officer. As regards the valuation of building, the District Valuation Officer estimated the value of the first floor at Rs. 9,50,912. The learned Commissioner of Income-tax (Appeals) considering the nature of construction, the facilities provided, subsequent value addition and age of building allowed further discount of 20 per cent. on the value determined by the District Valuation Officer. He accordingly reworked out the value of first floor at Rs. 7,60,730. The learned Commissioner of Income-tax (Appeals) further allowed 5 per cent. discount on account of co-ownership. Accordingly, the value of land and building was determined at Rs. 40,73,011 as against Rs. 58,19,100 determined by the District Valuation Officer. This resulted in an addition of Rs. 15,23,011. The learned Commissioner of Income-tax (Appeals) accordingly upheld the addition of Rs. 15,23,011. Aggrieved by the order of the learned Commissioner of Income-tax (Appeals), the assessee is in appeal before us in respect of sustenance of addition of Rs. 15,23,011 and the Revenue is in appeal restricting the addition to Rs. 15,23,011 as against Rs. 32,69,100. Before us, the learned autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urpose of ascertaining the correct value of the properties whether held as "stock-in-trade" or as an investment. As regards the appeal filed by the Revenue, it has been submitted that reduction in the value of building has been given by the learned Commissioner of Income-tax (Appeals) arbitrarily. He has allowed reduction of 20 per cent. without any reasons. He has also allowed reduction of 5 per cent. of the value of co-ownership. No reasons have been mentioned for giving a reduction of 20 per cent. and 5 per cent. It has also been submitted that there is not much difference in the area of Punjabi Bagh and Rajouri Garden and, therefore, the sale instances of Punjabi Bagh could be taken as comparable case for Rajouri Garden properties. Accordingly the Valuation Officer was justified in determining the value of the property at Rs. 58,19,100 as against Rs. 25,50,000 declared by the assessee. 15. We have heard both parties and gone through the material available on record. There is no dispute that the Assessing Officer made reference under section 142A of the Act for the purpose of estimation of investment in the property during the course of original assessment proceedings. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncern at that stage. This is so because the formation of the belief is within the realm of the subjective satisfaction of the Assessing Officer. From the decision of the hon'ble Supreme Court, it is clear that at the time of reopening of assessment, the Assessing Officer had to see whether there was any material on the basis of which a reasonable person could have formed the requisite belief. In the instant case, the District Valuation Officer's report constitutes relevant material in order to enable the Assessing Officer to form an opinion that income has escaped assessment. Accordingly, in our considered opinion, it is not a case of change of opinion and, therefore, this ground of appeal raised by the assessee is dismissed. 16. The next contention raised by the assessee is that the property was held as "stock-in-trade" and hence no unexplained investment was made. The assessee had only incurred expenditure in acquiring the property, therefore, the assessee's case does not fall under section 69 and consequently reference could not be made under section 142A of the Act. To support his contention, it has been stated that property was duly recorded in the books of account. The learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed fully by the assessee in the books of account, it is covered by the provisions of section 69B and consequently, the Assessing Officer was justified in making the reference under section 142A of the Act. Accordingly, we do not find any infirmity in the order of the learned Commissioner of Income-tax (Appeals) confirming the action of the Assessing Officer for making reference under section 142A of the Act. 18. The next contention of the assessee is that the District Valuation Officer has taken the sale instance of the remote area and not considered the instance of the same locality duly placed on record. The District Valuation Officer has taken the sale instance of Punjabi Bagh which was approved by the appropriate authority of the Income-tax Department. The property was sold on August 16, 1999 at Rs. 17,186 per sq. metres. The District Valuation Officer has applied the same rate to the property located at Rajouri Garden. Both localities are not adjacent but are very near and are located near inner Ring Road. It is also a fact that rate of the property in the assessment year 2003-04 were higher than the rates in 1999. The assessee had placed reliance on the land rates for the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 147(b). In the case of the assessee a reference was made under section 142A during the course of assessment proceedings and the District Valuation Officer had not given the report before completion of assessment. Hence, the facts of the case are distinguishable. In the case of CIT v. Darshan Singh (supra), it has been held that the Departmental Valuer cannot be called upon to give a report to the Assessing Officer under the Act except a reference under section 55A or section 269L of the Act. Therefore, report of the District Valuation Officer was held to be invalid. The facts of the case are also distinguishable as in the assessee's case the reference has been made under section 142A and not under section 131(1)(d) of the Act. Therefore, the assessee does not get any help from this decision. In the case of V. T. Rajendran (supra), the issue related to estimation of cost of construction and hence, the facts are distinguishable in this case also. In the case of Tej Pratap Singh (supra), the reference was made under section 131(1)(d) not under section 142A. Moreover, in this case the reassessment proceedings were initiated to assess the capital gains. Under these circumstances, the re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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