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Commissioner of Income Tax-II, Amritsar Versus M/s Freedom Board & Paper Mills, Amritsar

2015 (5) TMI 83 - PUNJAB & HARYANA HIGH COURT

Re-assessment proceedings - ITAT set aside the re-assessment proceedings on the ground that without rejecting the books of account of the assessee and by making reference to only the report of DVO addition was not justified - Held that:- In the present case, the proceedings have been sought to be opened by way of re-assessment, during the subsequent assessment proceedings, without following the prescribed procedure of rejecting the books of account which had been maintained by the assessee and t .....

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Vazifdar, Acting Chief Justice And G. S. Sandhawalia,JJ. For the Appellant : Mr.Denesh Goyal, Advocate For the Respondent : Mr. S. K. Garg Narwana, Sr.Advocate with Mr.Karan Garg, Advocate ORDER G.S.Sandhawalia J. This judgment shall dispose of ITA Nos.212, 213, 210 & 211 of 2013, pertaining to assessment years 2004-05, 2005-06, 2007-08 & 2009-10, respectively, involving common questions of law and facts. However, to dictate orders, facts have been taken from ITA No.212 of 2013, pertaini .....

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sessing Authority to make the addition was not justified and thus, allowed the appeals of the assessee. The substantial questions of law which have, thus, been sought to be raised by the Revenue, for admission of the appeals, read as under: (i) Whether on the facts and circumstances of the case, the Hon'ble ITAT was correct in law in quashing the reassessment proceedings for the assessment year 2004-05 by holding that the reassessment proceedings were initiated solely on the basis of report .....

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e approved valuer submitted by the assessee to be on the lower side. 3. The facts of the case show that during the course of assessment for the year 2007-08, it was noticed that the assessee had been raising construction of the factory building from the year 2003-04 to the year 2008-09. The matter was referred to the valuation cell by the Assessment Officer (for short, the 'AO') and on account of the difference of ₹ 4,12,136/- in the construction of the factory building, notice und .....

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appeal had been disposed of with a direction to dispose of the objection of the assessee after giving an opportunity of being heard. Accordingly, the difference in the valuation was determined at ₹ 3,79,248/-, for the period 2003-04, relevant to the assessment year 2004-05. Similar additions were also made for the subsequent years and the total difference was ₹ 73,49,607/-. 4. In the appeal filed by the assessee before the CIT, the plea taken was that the complete set of account book .....

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ndary walls, gate, watchman etc. Accordingly, it was held that sufficient opportunities had been given to the assessee and the AO was well within her jurisdiction to make the additions and there was vast variation between the cost of construction valued, by the DVO and in the books of account of the assessee. By the determination of the value, there was implied and underlined rejection of the books of account under Section 145(3) of the Act, which were suffering from various discrepancies and va .....

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td. Vs. Commissioner of Income Tax & others [2013] 356 ITR 74 to submit that the judgment of the Apex Court in the case of Sargam Cinema (supra) had been considered in the order of the Tribunal and not applied in favour of the assessee. 7. Counsel for the assessee, on the other hand, supported the reasoning given by the Tribunal and submitted that the assessee was maintaining books of account and in the absence of any rejection, the matter could not have been referred to the DVO and it was a .....

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fied basis. Relevant observation reads as under: 5. Learned counsel for the revenue was unable to justify that when the books of account in respect of cost of construction have been maintained by the assessee and the same were not rejected, how the matter could be referred to the DVO for assessing the value. Wherever the books of account are maintained with respect to the cost of construction, the matter can be referred to the DVO after the books of account are rejected by the revenue on some le .....

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e taken into consideration, including the circular No.5 of 2005, issued by the Central Board of Direct Taxes, to come to a similar conclusion that without rejecting the books of account, the matter should not be referred to the DVO. Relevant observation reads as under: 13. Section 142A of the Act has been incorporated primarily for verification of the value of any investment in respect of cases enumerated therein. The Assessing Officer would not be justified in invoking the aforesaid provision i .....

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construction of the asset and claims its valuation on the basis of estimate of the report of the registered valuer, the Assessing Officer is empowered to make a reference to the DVO after forming a prima facie opinion that the value of the investment is not genuinely disclosed and is required to be assessed for the purposes of Sections 69, 69A or 69B of the Act. In other words, Section 142A of the Act, thus, cannot be invoked where valuation of the cost of construction is bonafide and based on .....

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