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2016 (3) TMI 1055 - ITAT CHENNAI

2016 (3) TMI 1055 - ITAT CHENNAI - TMI - Applicability of provisions of sec. 142A - non rejection of books of accounts - addition u/s 69B - Reference made to DVO u/s 142A - Held that:- A decided in M/s Legend Estates Pvt Ltd. vs DCIT [2014 (4) TMI 154 - ITAT HYDERABAD] 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 there is some material with the AO to show that whatever estimate ass .....

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truction or whatever is declared by him in this regard is not believable - reference to valuation cell u/s. 142A can be made during the course of assessment and reassessment and not for the purpose for initiating assessment Decided against Revenue.

Penalty u/s 271(1)(c) - Held that:- In this case, the assessee failed to furnish fully and accurately all particulars of expenditure said to be incurred for the land development. The clarification given by the assessee is not sufficient .....

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ex facie bogus, it would be treated as a case of concealment or inaccurate particulars and penalty is to be levied. We may also take note of the observation of the Supreme Court in the case of Union of India vs Dharmendra Textile Processors [2008 (9) TMI 52 - SUPREME COURT ], wherein held that the explanation appended to sec. 271(1)(c) of the Act entirely indicate the element of strict liability on the assessee for concealment or for giving inaccurate particulars while filing the return. The ob .....

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- ITA No. 1575 & 1794/Mds/2012 - Dated:- 22-1-2016 - Chandra Poojari, AM And Challa Nagendra Prasad, JM For the Appellant : Shri P Radhakrishnan, JCIT For the Respondent : Shri S Sridhar, Adv ORDER Per Chandra Poojari, Accountant Member These appeals of the Revenue are directed against the orders of the Commissioner of Income-tax (Appeals)-I, Coimbatore, dated 21.5.2012 and 10.7.2012 for assessment years 2008-09 and 2009-10, respectively. I.T.A.No.1794/Mds/2012 - A.Y 2009-10 2. The Revenue raise .....

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9;s report, the valuation of the business asset was done by the DVO by determining the cost of construction at ₹ 28,16,77,000/- as against the admitted cost of construction of ₹ 26,38,53,630/-. Thus, there was a difference of ₹ 1,78,23,640/-. The Assessing Officer made an addition of ₹ 1,75,00,000/- u/s 69B of the Act towards this discrepancy. The assessee challenged this addition before the CIT(A) stating that the provisions of sec. 142A is not applicable for valuation o .....

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cted the books of account before referring the mater to DVO for valuation. If the Assessing Officer straight away refers the matter to DVO without rejecting the books of account, the reference to DVO is bad in law and consequently, the assessment framed is also bad in law. He also observed that the provisions of sec. 142A is not applicable to refer the stock-in-trade for valuation by DVO so as to apply sec. 69B of the Act. Only the investments could be valued by DVO in terms of sec. 142A of the .....

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s and circumstances of the case. First of all, we have to go through the provision of sec. 142A of the Act to consider the issue in hand. The relevant provision sub-section 1 of sec. 142A reads as under: "142A(1) For the purpose of making an assessment or re-assessment under this Act, where an estimate of the value of any investment referred to in sec. 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 .....

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ication of labour payments was also not available. Since the expenditure incurred by the assessee was not fully supported by vouchers and proper evidence, the assessee offered additional income to the tune of ₹ 1.60 crores. In mean time the Assessing Officer made reference to the District Valuation Officer on 04-09-2006 and the DVO submitted the valuation report on 14-09-2009 as per which the cost of construction of the 22 properties was arrived at RS55,83,05,733/-. The assessee has disclo .....

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was understated or anything above what was disclosed by assessee in the books of account. It is a clear cut case that the assessee has M/s. Legend Estates Pvt. Ltd. produced the books of account but the Assessing Officer has not rejected or no defect was pointed out in the books of account regarding cost of construction of the project before reference to the DVO. We further find from the case records that even before verifying the books of account regularly maintained and without pointing out a .....

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rly maintained and without rejecting the books u/s.145, of the Act there is no reason to add any amount on the presumption that the cost/investment in construction is low. Thus, without rejecting the books of account regularly maintained, the addition cannot be made only on the basis of the DVO's report. We further find that the assessee has supplied requisite information to DVO and also produced before Assessing Officer which he has seen and verified but has no commented on the genuineness .....

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tion that for the purpose of making an assessment or reassessment under this Act, once the process of assessment is initiated, the word 'making' should be presumed to be associated with both 'assessment' or 'reassessment', 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 issua .....

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such reference. Requirement would arise or could be felt only when there 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 Aa is necessary which requires him to make a reference to the DVO u/s142A. It can only be during the course of pendency of assessment or reassessment that the AO frame his mind to .....

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e of Umiya Co-operative Housing Society Ltd. v ITO (2005) 94 TTJ 392 (Ahd), wherein it is held as under:- "7. From the above, it is evident that s.142A empowers the AO to require the valuation officer for making the estimate of the value of any asset provided the AO, required the same for the purpose of making assessment or reassessment. He above provision does not empower the AO to refer the matter to the DVO for gathering information for reopening of assessment. Making the reassessment an .....

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he language of s. 147. Therefore, the condition prescribed under s. 147 for reopening of assessment still exits. The Hon'ble Gauhati High Court in the case of Bhola Nath Majumdar and the Tribunal, Jodhpur Bench, in the case of Vi jay Kumar (supra) have taken the view that the valuation report is only an opinion of the valuer and an opinion of a third party cannot be a reason to believe of the ITa. The Hon'ble Bombay High Court in the case of J amnadas Madhavji & Co. (supra) has held .....

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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: 8. When the process of reopening of assessment ends and the assessment is validly reopened thereafter, the process of making reassessment starts. The .....

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and the ITAT Jodhpur Bench in the case of Vi jay Kumar (supra) have taken the view that the valuation report is only an opinion of the valuer and an opinion of a third party cannot be a reason to believe of the ITO. The Hon'ble Bombay High Court in the case of Jamnadas Madhavji and Co.(supra) have held that the Assessing Officer cannot issue summons u/s. 131 for the purpose of making investigation for reopening of the assessment. 9. In view of the above, we are of the opinion that the issue .....

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does not survived. Mr. Bhatt has mainly emphasized on Section 142A of the Act. He submits that the Assessing Officer at any time can make reference to the Valuation Officer for valuing the property for the purpose of assessment or reassessment, where the value of any investment referred to in Section 69 or Section 69B or Sections 69A & 69B is required to be made. Whether any income can be taxed by deeming the value of investment not disclosed, are issues where such types of questions arise w .....

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s are pending, the Assessing Officer has no jurisdiction to refer any property for assessment. When the notice u/s.148 has been issued, and addition has been made by adopting the value estimated by the Valuation Officer, and when we find that the Assessing Officer is not empowered to refer any property for valuation in a case where no assessment proceedings or reassessment proceedings of the assessee is pending before him, we see no justification to make any addition in such cases." Even th .....

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oceedings under this Act is pending and not otherwise. Accordingly, this legal issue, we decide in favour of the assessee and against the Revenue". 12. 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 find during the course of survey u/s 133A 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 .....

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be correct and complete in all respect and no defect is pointed out therein and cost of construction of building is recorded therein, then the addition on account of difference in cost of construction could not be made even if a report is obtained within the meaning of Sec.142A from the DVO. It is because the use of the report of the DVO obtained u/s.142A is not mandatory but is discretionary as the word used is 'may' therein. Accordingly, we are of the considered view that in the prese .....

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ct and this issue is squarely covered in favour of the assessee and against the Revenue by the decision of Hon'ble Delhi High Court in the case of AAR PEE Apartments (P) Ltd. (supra). The Hon'ble Delhi High Court held as under:- "6. Before we advert to the interpretation to the aforesaid provision we deem it proper to reproduce the following discussions detained in the order of Tribunal on this aspect:- "The next point to be determined is whether the AO is justified in referrin .....

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however, even under s. 142A, a reference can be made for assessment or reassessment where an estimate of value of any investment referred 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. 6 .....

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explained 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 with the provisions of s. 142A. Hence the decision of Hon'ble Supreme Court in the case of Smt. Amiya Bala Paul (supra) will still apply to hold tha .....

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eferred to in s 69 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 b him." 9. It is clear from the reading of sub-s.(1) of this provision that it enables the AO to get the valuation done from the Valuation Officer in certain specific types of cases. These would be the cases wherein an estimate of the value of any .....

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diture incurred on the project. As pointed out above the assessee had shown the expenditure on the at ₹ 38,58,53,602. Since AO had doubted this expenditure, he referred the matter to DVO for the purpose of determining the cost of construction of said project. However, as pointed out above, for the purpose of getting himself satisfied about the purported unexplained expenditure under s. 69C powers under s. 1142A could not be invoked. 11. Learned Counsel for Revenue submitted that such a pow .....

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ing a separate provision under s. 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 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 s .....

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meaning as sought to be made out, the provisions of s. 69C shall be rendered otiose. 15. The learned counsel for Revenue however took another plea to buttress her submission. He submitted that having regard to the circumstances under which s. 142A was inserted by the Finance Act, 2004, it be deemed that the intention of legislature was to include even those unexplained expenditure stipulated in s. 69C. No doubt the need behind inserting s. 142A was to empower the AO to make a reference to the Va .....

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the s. 142A was inserted in the form as it appears on the statute book now. If the intention was to include unexplained expenditure as contemplated in s. 69C of the Act as well this provision should have been specifically mentioned in s. 142A of the Act. 16. From the reading of sub-s.(1) of s. 142A, it is clear that the legislature referred to the provision of ss. 69, 69A and 69B but specifically excluded 69C. The principle of casus omissus becomes applicable in a situation like this. What is n .....

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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 13. In view of the above facts and the judgment of Hon'ble Delhi High Court in the case of AAR PEE Apartments Pvt. Ltd. (supra) we are of the considered view that the Legislature has not include, unexplained expenditure stipulated in Sec.69C of the Act for invoca .....

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at being shown by the assessee as current assets not as an investment, it cannot be subject matter of reference u/s 142A. Even otherwise, the Assessing Officer referring the matter to the DVO for valuation of current assets in one assessment year, he cannot disturb the concluded assessments of other assessment years. Accordingly, we decide this issue in favour of the assessee and against the Revenue. 14. In view of the above decision on both the legal issues, we decide this appeal of the assesse .....

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. The facts of the case are that the assessee claimed payment of development charges of ₹ 59,77,000/- in respect of land sold to Smt. Soundaram and Smt Seema Sinha. The assessee produced only vouchers signed by the Managing Director of the Company. The assessee has not given full particulars of land development work carried out by the assessee. The land development work said to be carried on by the Managing Director was prior to purchase of land by the assessee-company and the land was als .....

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e expenditure. Consequent to this, he initiated penalty proceedings u/s 271(1)(c) of the Act and levied penalty at 100% of the tax sought to be evaded. 9. On appeal, the CIT(A) observed that land development expenditure was incurred by assessee's Managing Director towards swimming pool demolition and clearance expenses before June 2005. All these expenses were incurred by the Managing Director of the assessee-company on behalf of the assessee-company. As at that time the assessee was not hav .....

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g Director of the assessee-company and he had paid tax thereon which was voluntary action of the Managing Director and no motive could be attributable. Further, the assessee-company paid tax on the basis of book profits determined under the provisions of sec. 115JB of the Act and it cannot be construed that assessee tried to reduce the tax liability while computing the short term capital gains. Considering the case laws relied on by the assessee, the CIT(A) opined that it is not a fit case for l .....

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ging Director of the assessee incurred the expenditure and since there was no sufficient funds in the hands of the assessee, he has not submitted the bills to the assessee-company. This amount has been shown as receipt in the hands of the Managing Director of the assessee and paid tax thereon voluntarily, therefore, no penalty could be levied, according to the ld. Counsel. However, the vouchers submitted by the assessee before the Assessing Officer are only self-made vouchers and they do not bea .....

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by Managing Director on behalf of the assessee-company. When no service has been rendered by the Managing Director showing the receipt from assessee-company in his hands as income and paying tax thereon, does not disentitle the Assessing Officer from levy of penalty u/s 271(1)(c) of the Act of the Act. We have examined the penalty proceedings. In our opinion, the order of the Assessing Officer imposing penalty was without any blemish and there was no cause for interfering in it by the CIT(A). Th .....

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hat insufficient information in vouchers and also for the reason that it was incurred before acquisition of land by the assessee. In our opinion, it is not for the CIT(A) to substitute his own wisdom with that of the Assessing Officer. If he wants to give any relief to the assessee, the facts shall be borne out of the record of the assessee that the Managing Director has rendered service to the assessee so as to develop the land. In our opinion, the findings given in the assessment proceedings a .....

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