TMI Blog2016 (8) TMI 1500X X X X Extracts X X X X X X X X Extracts X X X X ..... to tax being the investment made in the residential house during all these years has escaped assessment. Unexplained investment in construction of residential house while framing the reassessment - HELD THAT:- It is clear from the reassessment order that instead of making addition under Section 69 of the Act being the reason for reopening of assessment, the Assessing Officer himself has changed his mind and made the addition only on account of unexplained credit in the capital account. Therefore the basis of reopening itself was not found to be correct reason making any addition of income or reassessment of income when the Assessing Officer has finally framed the reassessment order. In the case of CIT Vs. Jet Airways (I) Ltd [ 2010 (4) TMI 431 - HIGH COURT OF BOMBAY] has held that the condition precedent to exercise on the jurisdiction under Section 147 is the forming of reason to believe by the AO that income chargeable to tax has escaped assessment and subsequently if the Assessing Officer found that as a matter of fact the same is not escaped assessment, it is not open to him independently to assess some other income. Accordingly, the reassessment of these five year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of Section 147, the reopening of assessment is bad in law. 3. The CIT (Appeals) ought to have appreciated that the assessment being reopened on the ground of cost of construction/valuation of residential house, the reopening is bad in the eye of law as settled by the Hori'ble Supreme Court in the case of (1) Sargarn Cinema vs. CIT (2010) 328 ITR 513 (SC) and (2) ACIT vs. Dhariya Construction Co (2010) 328 ITR 515 (SC) and therefore the consequent assessment order is not sustainable in the eye of law. 4. Without prejudice, the CIT (Appeals) ought to have appreciated that the reopening of assessment was made on a mere change of opinion more so on the allegations of investment made by the Appellant and that there was no material whatsoever with the assessing officer to arrive at the conclusion that there was escapement of income and therefore the assessment order is not sustainable in the eye of law. 5. The CIT (Appeals) grossly erred in sustaining the addition with regard to the agricultural income when admittedly the assessee was having 5 acres of agricultural land and therefore the estimation of ₹ 3,000 / - per acre by the assessing officer is highly unjustif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luation officer, the Assessing Officer reopened the assessment of the assessee by issuing a notice under Section 148 on 23.3.2011. The assessments were completed under Section 143(3) r.w.s. 147 of the Act vide order dt.28.12.2011. The assessee challenged the action of the Assessing Officer before the CIT (Appeals) but could not succeed. 6. Before the Tribunal, the learned Authorised Representative of the assessee has submitted that the assessments were reopened by the Assessing Officer on the basis of the DVO s report and valuation therefore the reopening is not valid as the Assessing Officer has not applied his mind to form a belief that income assessable to tax has escaped assessment. He has further submitted that there was no other corroborative evidence or material with the Assessing Officer except the report of the DVO to reopen the assessment. In support of his contention, he has relied upon the decision in the case of ACIT Vs. Dhariya Construction Co. 328 ITR 550 (SC) and submitted that the Hon'ble Supreme Court while confirming the decision of Hon'ble High Court has held that the opinion of the DVO per se not an information for the purpose of reopening of assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstitute a tangible material for reopening of the assessment of the assessee. 8. I have considered the rival submissions as well as the relevant material on record. The reason recorded by the Assessing Officer for all these five assessment years are common which reads as under : Shri Narayanrao M More H.No.8-9-270/A-62, Guru Nagar Colony, Bidar. PAN : ASPPM 5328N Asst. Year : 2007-08. A Notice u/s. 148 was issued and served on the assessee's wife Smt. Rukmini Narayanrao More on 29/03/2010, on the ground that Smt Rukmini Narayanrao More has constructed a residential house at H.No. 8-9-270/A-62, Gutunagar Colony, Bidar. Vide this office Notice u/s 148 dtd: 29/03/2010, Smt. Rukminibai N More was to deliver a return of income in the prescribed form within 31 days from the date of receipt of the notice. There had been no compliance. A Reference Proforma was issued for estimating the cost of investment under section 142(A) of the Income - tax Act 1961 addressed to The Assistant Valuation Officer., I.T.Dept., Hubli to evaluate the cost of investment in construction of the above said residential house. The Valuation Officer Valued the residential house at ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stment under Section 142(A) of the Act to the DVO. The DVO in its report has stated that the investment in the residential house of ₹ 41,40,400 was made during various financial years from 2003-04 to 2007-08. On the basis of the said report, the Assessing Officer has reopened these five assessment years of the assessee. It is clear from the reasons recorded by the Assessing Officer that apart from report of the DVO, there is no other material or corroborative evidence to show that the alleged investment was made by the assessee in the residential house during all these assessment years. It is pertinent to note that the Assessing Officer has presumed the investment of each year based on the DVO s report without referring any other documents or evidence to indicate that the construction of the property started in the FY 2003-04 and it continued up to FY 2007-08 relevant to the assessment years 2004-05 to 2008-09. Therefore except the report of the DVO there is no other material either referred in the reasons recorded or it was available with the DVO. There is nothing in the reasons recorded as what is the basis of the DVO s report to say that the assessee has made the investmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome Tax vs Sadhna Gupta reported in (2013) 352 ITR 0595, wherein once again similar question came up for consideration to examine as to whether the Tribunal committed an error in not relying upon the District Valuation Officer s Report under Section 142A and thereby deleting addition of the income based on the said report. The High Court of Delhi after considering the aforesaid question, observed at para Nos. 4 and 5 as under:- 4. Only point to be considered is whether the valuation rendered by the DVO is to be taken into account or not. It has been argued by the learned counsel for the revenue that the assessing officer was justified in referring the matter to the DVO for an opinion with regard to the fair market value of the property and once that opinion has been rendered, the same has to be taken into account and if that were to be so, the addition of 2,81,83,000/- would be fully justified. Consequently, it was submitted by the learned counsel for the revenue that the Tribunal had erred in deleting the addition. On the other hand the learned counsel for the respondent referred to a Division Bench decision of this Court in the case of CIT v. Shri Puneet Sabharwal: (2011) 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm basis of any addition on the part of the revenue. Since in the said case there was no evidence other than the report of DVO, it could not be relied upon for making addition. The question was decided in favour of the assessee against revenue and the appeal of the revenue was dismissed. 17. We need not burden our judgment with other case-laws, since in our view the aforesaid two decisions of the High Court of Delhi throws light on the settled legal position for the purpose invoking power under Section 69 of the Act. 18. Examining the matter further on facts, in the present case, it appears that it is not a case of the revenue that there was any independent or corroborative material for consideration paid or received in addition to than mentioned in the sale deed. The basis of the addition is only valuation report of the District Registrar under the Stamp Act and the Departmental valuer. As such, there is no independent material which had come on record for such purpose. The payment of additional stamp duty may be on the basis of the valuation of the valuer of the stamp Act authority but same ipso facto cannot be said to be a valid ground to initiate the proceedings under Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apital account. Therefore the basis of reopening itself was not found to be correct reason making any addition of income or reassessment of income when the Assessing Officer has finally framed the reassessment order. The Hon'ble Bombay High Court in the case of CIT Vs. Jet Airways (I) Ltd. 331 ITR 236 has held that the condition precedent to exercise on the jurisdiction under Section 147 is the forming of reason to believe by the Assessing Officer that income chargeable to tax has escaped assessment and subsequently if the Assessing Officer found that as a matter of fact the same is not escaped assessment, it is not open to him independently to assess some other income as held in paras 22 23 as under : 22. Explanation 3 lifts the embargo, which was inserted by judicial interpretation, on the making of an assessment or reassessment on grounds other than those on the basis of which a notice was issued under s. 148 setting out the reasons for the belief that income had escaped assessment. Those judicial decisions had held that when the assessment was sought to be reopened on the ground that income had escaped assessment on a certain issue, the AO could not make an assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that decision. While it is open to Parliament, having regard to the plenitude of its legislative powers to do so, the provisions of s. 147(1) as they stood after the amendment of 1st April, 1989 continue to hold the field. Accordingly, the reassessment of these five years is also not sustainable when the Assessing Officer has not made any addition of income on account of unexplained investment but made some other addition. In view of the above discussion, the reassessment for the Assessment Years 2004-05 to 2008-09 is not sustainable. 10. Since the reopening itself is quashed therefore I do not propose to go into the merits of the other additions made in the reassessment. 11. For the Assessment Year 2009-10, the Assessing Officer has framed assessment under Section 143(3) of the Act. The assessee filed his return of income on 20.12.2010 declaring income from rent of ₹ 1,40,000 and income from agriculture of ₹ 65,200. The Assessing Officer found that the assessee has credited his capital account of ₹ 1,80,000 as sale of gold and insurance of ₹ 51,244. The Assessing Officer allowed an amount of ₹ 10,000 from sale of gold as shown in the balanc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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