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TMI Blog2012 (8) TMI 157X X X X Extracts X X X X X X X X Extracts X X X X ..... constructing the "Ambience Mall Projects", at NH-8, Gurgaon. Major construction work for the Mall was by M/s Ambience Projects and Infrastructure Ltd. and expenses were accounted for on the basis of bills drawn by the construction company. Certain costs and expenses were incurred directly by the assessee in its project. 3. During the assessment proceedings, the AO, based on certain seized documents mentioned in the assessment order concluded that the expenses incurred on the construction of Ambience Mall project, NH-8, Gurgaon were not completely reflected in the books of account. He therefore, made a reference to the Valuation Officer under Section 142A of the Income Tax Act. The Valuation Officer in his report, stated that the total investment incurred in the said property should have been Rs. 437,88,53,104/- over various years. As against that the assessee had shown the investment at Rs. 421,60,56,594/- for the relative period, in its books of account. The comparative year wise details of the expenses shown by the assessee company and as estimated by the Valuation Officer are as under: Period of Construction Cost of construction as per returns Cost of construction as per Va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specific defects in the books of account. It was argued that there is no obligation under any provision of the Act that before taking such action, the books of accounts or materials furnished by the assessee had to be rejected. 6. It was submitted that the reference to the DVO under Section 142A was valid and proper, because the assessee did not explain the incriminating material seized during the search. In effect, in this case, the additions made by the AO were under Section 69-B of the Act, because the assessee could not explain the documents found during the search. 7. It was next contended that the difference between the DVO's report and the assessee's investment, in percentage terms was very low, i.e. 3.86%. However, the quantum, in monetary or real terms was large. The lower appellate authorities fell into error in directing that the additions made in the case, should be set aside. 8. The appellant's contention was that the Ambience group has many associated concerns all of which were simultaneously searched. During the search, some incriminating material were found and seized which pertained to all the group entities. The incriminating material was subsequently explained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, in the absence of a finding rejecting the accounts of the assessee in this case, the reference to the DVO could not have been made by the AO in the first place. 11. Apart from the above consideration, the power of the AO to refer the question of valuation of expenses is the subject of binding decisions of this court. The Supreme Court had, in Amiya Bala Paul v Commissioner of Income Tax [2003] 262 ITR 407 (of course dealing with powers of the AO to refer the question of valuation, pre-Section 142-A, but in the context of the then prevailing Section 55-A and Section 142 (2)) held that no addition could be made by the AO, exclusively relying upon the value arrived at by the DVO. It was held that: "11. The common feature of Sections 133(6) and 142(2) is that the Assessing Officer is the fact-finding authority. It is his opinion on the basis of the facts as found on an enquiry conducted by himself which results in the assessment order. A report by the Valuation Officer under Section 55A is on the other hand the outcome of an inquiry held by the Valuation Officer himself and reflects his opinion on the evidence before him. Such a report would not be the result of an inquiry by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... struction of the said project. However, as pointed out above, for the purpose of getting himself satisfied about the purported unexplained expenditure under section 69C powers under section 142A could not be invoked. Learned counsel for Revenue submitted that such a power could be traced to Section 69B of the Act which relates to amount of investment, etc., not fully disclosed in the books of account. Her submission was that the " expenditure" incurred should be considered as coming within the expression " investment" . We cannot agree with this submission of learned counsel for the Revenue. If investments could include within its fold the 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 section 69C of the Act which deals with 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 the Assessing Officer, satisfactory, the amount covered by such expenditure or part t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. It is not the function of the court to legislate or to plug the loopholes in the law. In the present case, except the report of the DVO on which the Assessing Officer relied upon, there was nothing on record to suggest that there was any other evidence to disbelieve the expenditure shown by the assessee. 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 ongoing project, was examined and accepted by the Assessing Officer." 14. In the present case, during the time that the assessee's appeal was pending before the Appellate Commissioner, a remand report was sought for. This report was furnished on 28-01-2011. It stated, among other things, as follows: "a questionnaire was also issued to the assessee to explain the expenditure as mentioned in these seized documents and the assessee subsequently explained these expenses as mentioned in the various annexures with the supporting evidence vis-à-vis the books of accounts and same were verified." 15. It is also a matter of record that an Office Note had been made by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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