TMI Blog2021 (2) TMI 459X X X X Extracts X X X X X X X X Extracts X X X X ..... atutory period has not been challenged nor this factual finding could be controverted by the Revenue before us and, so it attains finality. In the result, we find that there is no valid valuation report submitted by DVO on reference by AO/Ld. CIT(A). AO had made the entire addition in all assessment years based on the initial valuation report submitted by the Valuation Officer pursuant to the reference made by the DDIT (Inv.) dated 11.07.2014 when he [DDIT (Inv.)] did not had the power to make the reference to the DVO which power he acquired as noted above only on 01.04.2017 by Finance Act, 2017 u/s. 132(9D) of the Act. And it has also been noted that neither the DVO filed the valuation report pursuant to the AO s reference dated 22.01.2016 nor the DVO filed the valuation report pursuant to the Ld. CIT(A) s reference through the AO by letter dated 29.01.2019. Thus, we note that the addition has been made only on the basis of the initial valuation report dated 18.11.2014 which was pursuant to the DDIT(Inv.) s reference which he [DDIT (Inv)] had no power to do call for. DDIT (Inv.) could not have referred the question of cost of construction/valuation of the assessee s building ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o dispose of all the aforesaid appeals by this consolidated order. For the sake of convenience, the facts relating to AY 2008-09 are taken as lead case and the result will be followed in all the other appeals. 2. The revenue has challenged the merits of the addition deleted by the Ld. CIT(A) whereas the assessee has challenged the legal issue as to whether any addition can be made u/s. 153A of the Income-tax Act, 1961 (hereinafter referred to as the Act ) without any incriminating material unearthed during search qua the assessee in the assessment years which were not pending before the AO on the date of search u/s. 132 of the Act on 13.03.2014 viz., (AYs 2008-09 to 2012-13). 3. Coming to the revenue appeal, the first ground of appeal of the revenue reads as under: 1. Whether Ld. CIT(A) is justified in deleting addition of ₹ 3,50,39,665/-, when AO had made the addition as unexplained investment u/s. 69 of the I. T. Act, on basis of valuation report of the District Valuation Officer (DVO). 4. Brief facts of the case as noted by the AO are that the assessee (educational Trust) had filed original return of income for AY 2008-09 on 30.09.2008 disclosing total inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to furnish the report at an early date since the assessment was getting time barred. But according to AO, since report from the DVO was not forthcoming, keeping in mind the interest of the revenue and taking into consideration the year-wise difference in valuation of property as determined by the DVO vide valuation report dated 18.12.2014, added back to the total income of the assessee the following amount for the respective assessment years as under: Asst. Year Amount 2008-09 ₹ 3,50,39,665/- 2009-10 ₹ 14,34,16,954/- 2010-11 ₹ 5,05,88,806/- 2011-12 ₹ 4,13,91,409/- 2012-13 ₹ 4,91,11,619/- 2013-14 ₹ 8,93,33,543/- 6. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) wherein the assessee had challenged the validity of the DVO report which was the only basis on which the additions were made by the AO by raising an additional g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of Ld. CIT(A) has been challenged by Revenue in their respective appeals. Further it was brought to our notice that the Ld. CIT(A) did not allow assessee s legal issue raised i.e. whether all the assessment in respect of assessment years i.e. AY 2008-09 to AY 2012-13 ( other than AY 2013-14) being not pending before the AO on the date of search i.e. 13.03.2014 being un- abated assessments, the AO while framing the re-assessment u/s. 153A of the Act could not have made any addition without the aid of any incriminating material unearthed during search qua the assessee qua the respective unabated assessment years. According to Ld. A.R since Ld. CIT(A) has not accepted/allowed the legal issue raised by it, therefore, the assessee trust has preferred these cross appeals challenging this impugned action of the Ld. CIT(A). 9. We have heard rival submissions and gone through the facts and circumstances of the case. We note that the Ld. CIT(A) by allowing the additional ground of appeal (supra) has held that the initial DVO report [pursuant to the reference made by DDIT/ADIT(Inv)] on the basis of which the AO has made the impugned additions in all the assessment years were non-est, re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... VO) in respect of the valuation of immovable properties held by the assessee trust; and pursuant to the same, District Valuation Officer (DVO) has furnished valuation report vide letter dated 18.12.2014. The AO notes from a perusal of the DVO report that there was difference in valuation of building as shown by the assessee trust in its premises. When this report (DVO) was confronted to the assessee vide show cause letter dated 05.01.2016, the assessee objected to this DVO report and challenged the same on various grounds inter-alia on the method of valuation adopted by the DVO and requested for revaluation of the properties. Therefore, the AO notes that he requested DVO to re-value the properties again which did not yield any result. It is noted that the assessee had objected to the action of DDIT(Inv) to have made reference to the DVO which according to the assessee the said authority [DDIT(Inv)] did not had powers to do so; and at that point of time only the AO u/s 142A of the Act could have called for the same which fact according to Ld. A.R is evident since this power was conferred on the DDIT (Inv) by inserting sub-section (9) in section 132 of the Act on 01.04.2017 and in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ind the DVO for submission of the DVO report however noted that they failed in their attempt. [In this regard, the Ld. CIT(A) notes that the AO had issued several reminders to the DVO vide letter dated 27.03.2019, 02.04.2019, 12.04.2019, 06.05.2019, 24.05.2019 and 02.07.2019, despite that DVO did not respond and submitted neither the report to him nor the AO till the date he passed the impugned order dated 15.11.2019]. Thereafter, the Ld. CIT(A) recorded his finding on the additional ground raised by the assessee (supra) before him that since the DVO failed to submit valuation report within six months on making reference which is mandatory as stipulated under section 142A of the Act, was pleased to allow the additional ground raised by the assessee. This action of Ld. CIT(A) has been challenged by the Revenue before us. For adjudicating this issue it would be gainful to reproduce the relevant provision i.e. section 142A of the Act (substituted by the Finance (No.2) Act, 2014, w.e.f. 01.10.2014). Reference to the DVO which reads as under: Estimation of value of assets by Valuation Officer 142A. (1) The Assessing Officer may, for the purposes of assessment or reassessment, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r market value of any property referred to in sub-section (2) of section 56 is required to be made, the Assessing Officer may require the Valuation Officer to make an estimate of such value and report the same to him. (2) The Valuation Officer to whom a reference is made under sub-section (1) shall, for the purpose of dealing with such reference, have all the power that he has under section 38A of the Wealth Tax Act, 1957 (27 of 1957) . (3) On receipt of the report from the Valuation Officer, the Assessing Officer may, after giving the assessee an opportunity of being heard, take into account such report in making such assessment or reassessment: Provided that nothing contained in this section shall apply in respect of an assessment made on or before the 30th day of September, 2004, and where such assessment has become final and conclusive on or before that date, except in cases where a reassessment is required to be made in accordance with the provisions of section 153A. Explanation. - In this section, Valuation Officer has the same meaning as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957). 15. It is noted from the history of the ena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner of Income Tax (Appeals) Guahati. The Income Tax Appellate Tribunal, however, following an earlier decision, allowed the assessee's appeal and held that the Assessing Officer could not have referred the question of the cost of construction of the assessee's house to the Valuation Officer. In this background the following question was referred to the High Court under Section 256 (2) of the Act. Whether on the facts and in the circumstances of the case, the Tribunal erred in law by holding that the Assessing Officer cannot refer the matter to the Valuation Cell(sic) for estimating the cost of construction of the house property . The Division Bench of the High Court held that although the Assessing Officer could not have referred the question of the cost of construction of the assessee's house to the Valuation Officer under Section 55 A of the Act, he had ample power under Sections 131 (1), 133 (6) and 142 (2) of the Act to ask for a Valuation Report from the Valuation Officer. It was held that each of these sections were enabling machinery provisions which invested ample powers in the Assessing Authority , and that any wrong mention of the provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and can discharge functions within the statutory limits under which he is appointed. It is not open to a Valuation Officer to act in his capacity as Valuation Officer otherwise than in discharge of his statutory functions. He cannot be called upon nor would he have the jurisdiction to give a report to the Assessing Officer under the Income Tax Act except when a reference is made under and in terms of Section 55 A or to a competent authority except under section 269L. We are therefore of the view that the High Court incorrectly answered the question referred to it in the affirmative. The Tribunal had not erred in holding that the Assessing Officer cannot refer the matter to the Valuation Officer for estimating the cost of construction of the house property. The appeal is accordingly allowed and the decision of the High Court set aside. There will be no order as to costs. [Emphasis given by us] 17. In the light of the decision of the the Hon ble Supreme Court in Smt. Amiya Bala Paul Vs. CIT (supra) the Parliament gave power to AO by the introduction of section 142A by Finance Act, 2004 (supra). Later on the Parliament taking note that the Authorized Officer of the searched ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order dated 30.03.2016. From a plain reading of section 142A of the Act it can be noted that the AO enjoyed the power to make a reference to the Valuation Officer to estimate the value including the fair market value of any asset, property or investments and thereafter the Valuation Officer shall estimate the value of the assets, property or investments after giving opportunity to the assessee to be heard and in case the assessee does not cooperate then the DVO can estimate the value of the asset, property or investments on the basis of best of his judgment and submit report within a period of six months from the end of the month in which reference is made. It should be borne in mind that the reference made by the AO u/s. 142A(1) of the Act is a statutory reference and, therefore, the report sent by the Valuation Officer u/s. 142A(6) of the Act is also a statutory report and, therefore, time limit prescribed therein are statutorily limited by time and the report if not made within the statutory time i.e. six months from the end of the month from which the reference is made will be considered as an arbitrary/whimsical exercise of power by the Valuation Officer without any regard to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n reference by AO/Ld. CIT(A). 20. Moreover, the Ld. AR drew our attention to page 20 of Ld. CIT(A) s impugned order wherein he [Ld CIT(A)] has reproduced his own letter dated 29.01.2019 which was written to the AO for obtaining the report of the DVO ; and the Ld AR pointed out that in this letter the Ld. CIT(A) has categorically observed . The first report of DVO was given without hearing the assessee So, according to Ld. AR, the initial DVO report dated 18.12.2014 submitted by DVO pursuant to DDIT (Inv.) reference dated 11.07.2014 is fragile for violation of Natural Justice. We find force in this submission of Ld. AR that DVO before preparation of his valuation report dated 18.12.2014 should have given opportunity to assessee and failure to do so will vitiate the valuation report dated 18.12.2014 for violation of Natural Justice and could not have been acted upon by the AO being bad in law. 21. To sum up the facts, we note that the AO had made the entire addition in all assessment years based on the initial valuation report submitted by the Valuation Officer pursuant to the reference made by the DDIT (Inv.) dated 11.07.2014 when he [DDIT (Inv.)] did not had the power to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is kilometers away from searched premises . So, from the perusal of panchnama and the assessment orders, we find that the reference made by DDIT (Inv.) for valuation of the properties on 01.04.2014 was without any incriminating materials which were un-earthed during search [oral or documentary which could have suggested that the assessee has shown less investment in its books for building construction] consequently DDIT(Inv) erred in making reference to DVO and when admittedly DDIT(Inv) did not enjoy the power to do so. In the aforesaid facts and circumstances the Ld. CIT(A) makes the finding that the failure of the DVO to submit valuation report within six months of making of valid reference, the DVO s initial valuation report dated 18.12.2014 could not have been relied upon to make additions cannot be faulted is in line with the ratio of the decision of the Hon ble Supreme Court in Smt. Amiya Bala Paul (supra). Further at para 20 (supra), we have taken note of the Ld CIT(A) observation in the letter dated 29.01.2019 wherein he has observed that DVO did not give opportunity to assessee before preparation/submission of DVO report dated 18.12.2014 (initial DVO report), so this DVO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are pending or not before the AO. We note that the relevant section itself clarifies that where an assessment was already completed against an assessee and any appeals or further proceedings are pending, then such appeals or other proceedings do not abate. We should keep in mind that merely because an assessee is subjected to search u/s 132 of the Act, such action by itself does not give carte blanche to the Department to subject such an assessee to the rigors of the assessment afresh for all the six years. It is for this reason that the Parliament in its wisdom has categorically created two classes among the six years, (a) un-abated assessment and (b) abated assessments. Consequent to a search conducted u/s 132 of the Act, the AO is required to issue notices u/s 153A of the Act to assess the income of the assessee for six assessment years preceding the date of search. These six assessment years comprise of assessments which are not abated ( non-pending assessment before AO on the date of search ); and assessments which are pending before the AO on the date of search, which would be treated as abated. In the case of abated assessments, the AO is free to frame the assessment in re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he course of the search, or other post-search material or information available with the Ld AO which can be related to the evidence found, it does not mean that the assessment can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to complete assessment proceedings. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the Ld AO. Completed assessments can be interfered with by the Ld AO while making the assessment under section 153A only on the basis of some incriminating material unearthed during the cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;ble Jurisdictional High Court in the case of Principal CIT vs M/s Salasar Stock Broking Ltd in G.A.No. 1929 of 2016 ITAT No. 264 of 2016 dated 24.8.2016 endorsed the aforesaid view of Hon'ble Delhi High Court in Kabul Chawla's case. The Hon ble High Court also placed reliance on their own decision in the case of CIT vs Veerprabhu Marketing Ltd reported in (2016) 73 taxmann.com 149 (Cal HC) and held as follows: Subject matter of challenge is a judgement and order dated 18th December, 2015 by which the learned Tribunal dismissed an appeal preferred by the Revenue registered as ITA No.1775/Kol/2012 and allowed a cross-objection registered as CO-30/Kol/2013 both pertaining to the assessment year 2005-06. The learned Tribunal was of the opinion that the Assessing Officer had no jurisdiction under Section 153A of the Income Tax Act to reopen the concluded cases when the search and seizure did not disclose any incriminating material. In taking the aforesaid view, the learned Tribunal relied upon a judgement of Delhi High Court in the case of CIT[A] vs. Kabul Chawla in ITA No.707/2014 dated 28th August, 2014. The aggrieved Revenue has come up in appeal. Mr. Bagaria, l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing material un-earthed during search to suggest any investment in building which is over and above the investment shown by the assessee in its audited books. And as found by us, the search party pursuant to search u/s 132 of the Act did not even visited the educational institution which fact is evident from the perusal of panchnama which shows that the search team has only searched the administrative office situate at Dwarika Building , 7, Sarat Bose Road, Kolkata-700020 and not at the campus of educational institution situated at Nilgunj Road, Panihati, Kolkata-700 114 . So, from the perusal of panchnama and the assessment orders, it can be safely inferred that the reference made by DDIT (Inv.) for valuation of the properties on 01.04.2014 was without any incriminating materials found during search [oral or documentary which could have suggested that the assessee has shown less investment in its books for building construction] Therefore, no addition was permissible in the assessment order u/s 153A of the Act in the case of un-abated assessments unless it is based on relevant incriminating material found during the course of search qua the assessee and qua the AY. Thus the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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