TMI Blog1997 (10) TMI 85X X X X Extracts X X X X X X X X Extracts X X X X ..... sst. yr. 1980-81. 4. Briefly stated the facts of the cases are that during the course of assessment proceedings for asst. yr. 1982-83 it was noticed by the AO that the assessee had completed construction of property known as 'Jaynath Hall' at Gondal Road, Rajkot. During the course of assessment proceedings for asst. yr. 1982-83 reference was made to the District Valuation Officer (DVO) to determine the cost of the said property. The DVO vide his report dt. 17th March, 1986 estimated the cost of construction at Rs. 7,57,700 as against Rs. 2,79,025 shown by the assessee. Consequently, the AO made an addition of Rs. 7,57,700-2,79,025 = Rs. 4,78,675 as unexplained investment under s. 69 of the IT Act, 1961, vide assessment order dt. 20th March, 1986. Aggrieved by the said assessment order the assessee went in appeal before the CIT(A), Rajkot, and the CIT(A) after considering the facts of the case as well as assessee's submissions set aside the assessment order vide his order dt. 20th March, 1987, and the matter was restored back to the file of the AO with a direction to the AO to provide a copy of the report to the assessee received from the Valuation Cell and after affording the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act. 7. Before the CIT(A) the assessee contended that the AO was not justified in making a reference to the DVO to decide the costs of construction, particularly, when the AO has not come to the conclusion that costs of construction shown by the assessee as per the books of accounts was not correct. It was also contended that previously the AO made an addition as per report of DVO in one year only i.e., for 1982-83 and the said order of the AO was set aside by the CIT(A) and not at the time of reassessment proceedings the AO has not properly appreciated all the materials put before him and has estimated the cost of construction at Rs. 4,50,000 without any basis or material on record. The assessee contended that the books of accounts of the assessee were complete in all respects and all the details, regarding the cost of construction were supplied to the assessee as per his requirement. No defect, whatsoever were found by the AO at the time of assessment as well as at the time of reassessment proceedings. The assessee had maintained the details regarding all the materials purchased and payments made to labourers. When the AO invited objections from the assessee to the proposed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs issued by the CBDT under VDIS. Under the said scheme the assessee was entitled to declare higher income particularly when the assessments have been set aside on appeal or pending assessment being reopened under s. 147. It was the assessee's stand that he was entitled to the benefits under the circulars issued by the Board. 9. For the asst. yr. 1980-81, the learned CIT(A) has passed comprehensive order wherein he has considered the entire relevant facts of the case as well as submissions made on behalf of the assessee. It is pertinent to state that for asst. yrs. 1981-82 and 1982-83 a consolidated order dt. 14th March, 1991, was passed by the Dy. CIT(A), Rajkot, wherein he has followed the order of the CIT(A), Rajkot, dt. 15th Nov., 1990, relating to asst. yr. 1980-81. While deciding the appeal for asst. yr. 1980-81, the CIT(A) has held that the estimation of cost of construction made by the AO was without any basis. There was no justification in estimating the cost of construction at Rs. 4.5 lakhs. The AO has not assigned any reason for rejecting the report of registered valuer, K.L. Khakhar. The CIT(A) held that the AO being a quasi-judicial officer has power under the Act t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he CIT(A), this takes away the very basis of AO on which he came to the conclusion that returns of income filed by the assessee under VDIS were not accepted. The CIT(A) concluded that the observation of the AO was not justified in not accepting the returns filed by the assessee under VDIS which were within clear intention to buy peace of mind and to pay some more tax to avoid unnecessary litigation. Consequently, the appeals were allowed by the CIT(A)/Dy. CIT(A) and the AO was directed to accept the returns filed under VDIS for the assessment years under consideration. The additions made on account of cost of constructions in all the assessment years under consideration were deleted by the CIT(A)/Dy. CIT(A). 11. Before us, Prabhakant, learned Departmental Representative submitted that the CIT(A) was not correct while deleting the additions made by the AO on account of cost of construction. According to him, the AO's estimation at Rs. 4.5 lakhs seems more realistic, particularly when the assessee himself has filed the revised return showing the unexplained cost of construction. At the initial stage the assessee had shown the cost of construction at Rs. 2,79,025. Subsequently the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and have also not been furnished before detection by the Department. 13. On behalf of the assessee M.P. Sarda, learned counsel for the assessee, strongly supported the impugned orders and the reasons given for allowing the assessee's appeals. The learned counsel further submitted that the appellate authority below have considered the entire relevant facts of the case and have also meticulously appreciated the material on record. He, therefore, submitted that the impugned orders deserve to be upheld. The learned counsel also submitted that the assessee had maintained proper books of accounts, cost of construction duly reflected therein, the books of accounts and all particulars of costs of constructions and bills and vouchers were also produced before the AO. The AO has not pointed out any defect in the books of accounts or in the cost of construction. The learned counsel also submitted that in absence of findings of any glaring error or defect in the books of accounts, the cost of constructions as reflected in the books of accounts cannot be rejected and be substituted by the cost of construction estimated by the DVO. In support of these contentions, the learned counsel relied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unsel, therefore, submitted that in the revised assessment, after admitting that the original valuation by the DVO was on higher side, the impugned addition was made in arbitrary manner on a baseless estimate in disregard to the expert's report, and the detailed submissions without even furnishing DVO's comments to the assessee. The addition was made in violation of principles of natural justice, according to the learned counsel the same deserves to be deleted. Reliance was also placed on the decision in the case of Colonisers vs. Asstt. CIT (1993) 45 TTJ (Hyd) (SB) 114 : (1992) 41 ITD 57 (Hyd) (SB). 15. The learned counsel also invited our attention to the following papers/documents: (1) Statement of income filed with the returns under the VDIS; (2) Letter dt. 21st March, 1988, to CIT, Rajkot; (3) Reply dt. 27th Oct., 1988, by CIT, Rajkot; and (4) Letter dt. 28th Nov., 1988, to CIT, Rajkot. The learned counsel while referring to abovestated documents submitted that the assessee's conduct was bona fide and the returns were filed to buy mental peace and no concealment of income was established. According to the learned counsel, when the AO himself has ignored the D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to DVO for his comments. The DVO has categorically stated that estimate of cost of construction made earlier was on higher side. Neither the AO nor the DVO pointed out any material defect in the books of accounts or in the cost of construction declared by the assessee. There is no even a whisper about this point in the original assessment, dt. 20th March, 1986, for asst. yr. 1982-83 or in the assessment years under appeal. The AO has also not rejected the books of accounts by invoking the provisions of s. 145 of the Act. It is well settled in the absence of findings of any glaring error or defect in the books of accounts, the cost of construction as reflected in the books of accounts cannot be rejected and be substituted by the cost of construction estimated by the DVO. The assessee has also filed a copy of observations and comments of K.L. Khakhar on the DVO's report. The cost of construction estimated by Khakhar is Rs. 3.28 lakhs and this estimate of cost of construction has been made following detailed itemwise method which report is available at pp. 35 to 55 of assessee's paper-book. The assessee's cost of construction after including Rs. 70,000 being the amount of voluntaril ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tness. The AO has totally failed to appreciate the report of registered valuer Khakhar as well as his letter, dt. 15th March, 1989. The AO stated that the assessee himself has filed the return of income under VDIS showing unexplained cost of construction. In our view the AO has correctly not appreciated the facts of the case in its entirety because while submitting the revised return under VDIS in the statement of income filed with the revised returns, the assessee stated that the cost of construction shown in the books of accounts, is the actual amount spent for construction, however, to buy mental peace the additional costs of construction amounting to Rs. 70,000 for assessment years under consideration are being disclosed. We also find that in this case original assessment for asst. yr. 1982-83 was set aside by the CIT(A), Rajkot, on 20th March, 1987, wherein the AO was directed to supply DVO's report to the assessee. In spite of the directions of the CIT(A) the DVO's report was given to the assessee after 18 months of appellate order passed by the CIT(A), Rajkot. The DVO has admitted that his earlier estimate requires reduction/modification. In these circumstances, the AO was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contested in appeal, can such amount be declared? Answer.—Yes. Except in search and seizure cases. In Connection With Public Circular No. 423, dt. 26th June, 1985 and Circular Nos. 432, 439, 440 and 441 issued by the CBDT, New Delhi, on 15th Nov., 1985. This resume was addressed to the President, Chamber of IT Consultation, Bombay, by the office of Chief Public Relations Officer, IT Department, Aaykar Bhawan, Bombay, vide his letter dt. 22nd Jan., 1986. 22. In the instant case admittedly the revised returns under Amnesty Scheme were filed on 31st March, 1987, by the assessee. The AO's base for not accepting these returns under the Amnesty Scheme was the DVO's report. Subsequently the said report was not accepted by the AO himself. Even the DVO himself commented upon that his previous report required a suitable reduction/modification. As we have already held above that even the estimate by the AO at Rs. 4.5 lakhs was without any basis and against principles of natural justice. The circulars issued by the CBDT under Amnesty Scheme afforded an opportunity to an assessee to file his return disclosing true income/wealth irrespective of what might happen earlier. The asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
