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2009 (3) TMI 652 - AT - Income TaxApplication for condonation of delay - inordinate delay of one year and 92 days - sufficient cause - HELD THAT - The Hon ble Supreme Court in the case of Collector, Land Acquisition v. Mst. Katiji 1987 (2) TMI 61 - SUPREME COURT held that ordinarily, a litigant does not stand to benefit by lodging an appeal late. The Hon ble Supreme Court further held that every day s delay must be explained does not mean that a pedantic approach should be made. Why not every hour s delay, every second s delay ? The doctrine must be applied in a rational, common sense and pragmatic manner. It is also well-settled law that length of delay is not to matter in the context of condonation of delay. At this stage, we may point out that the revenue has not brought any material on record to controvert the facts stated in the application of condonation of delay. Considering the facts and the fact that the FIR has been lodged by the assessee and also considering the assessee s explanation for delay and the settled legal position, we are of the view that there was sufficient cause, which prevented the assessee from filing the appeal before the Tribunal within time. Therefore, we condone the delay in filing the appeal. Jurisdiction to any authorities mentioned in the definition by the CBDT under the provisions of section 120 of the Income-tax Act, 1961, to act as an AO - DDIT made reference to the DVO before completing the construction of the house property - no proceeding was pending in the case of the assessee before making reference to the DVO by the DDIT - Validity of assessment order passed on the basis of such valuation report - HELD THAT - The authorities mentioned in the definition of AO in section 2(7A), must be assigned the jurisdiction to any authorities mentioned in the definition by the CBDT under the provisions of section 120, to act as an AO. Only in that circumstances that Assistant Commissioner or Dy. Director of Income-tax, other authorities mentioned in the definition u/s 2(7A), can act as AO. In this case, the DDIT (Investigation II), Indore, who issued the commission u/s 131(1)( d ) has not been assigned jurisdiction to act as an AO of the assessee Shri Rajeev Mewara. Therefore, the finding of CIT(A) that the DDIT (Investigation II), Indore, is an AO by virtue of the provisions of section 2(7A), is not valid. Further, the DDIT (Investigation) has made reference to the DVO by virtue of powers conferred on him under sub-section (1A) of section 131. However, such reference by the DDIT(Investigation), Indore, is illegal and he has exaggerated his jurisdiction as the power under sub-section (1A) of section 131 has been conferred on the DDIT(Investigation) for entirely different purposes and not for the purpose of valuation of the house property. it is noted that none of the condition mentioned in sub-clauses ( i ) to ( v ) of sub-section (1) of section 132 has been mentioned for reference to the DVO to value a house property as has been done in the instant case by the ld. DDIT (Investigation - II), Indore. We hold that reference made by the DDIT(Investigaiton-II), Indore, for valuation of the house property to the DVO u/s 131(1)(d) is itself illegal and beyond the power of the Dy. Director of Income-tax (Investigation), Indore. Therefore, subsequent action, i.e., valuation of the property and assessment order passed on the basis of such valuation report also had become illegal and void ab initio. This view is also supported by the decision of ITAT, Allahabad Bench in the case of Baldev Plaza 2004 (6) TMI 239 - ITAT ALLAHABAD . Hence, this ground of appeal of the assessee is allowed. Cost of construction of house property estimated by the DVO - assessee also got valued the property by the approved valuer, who estimated the cost - AO allowed reduction @ 20 per cent on the cost determined by the DVO - balance excess added as unexplained investment in the construction of the said building - CPWD rates were adopted - claimed for deduction @ 25 per cent - HELD THAT - The ld AR contended that after adopting the cost of the house on the basis of the CPWD rates, no further addition has to be made by the DVO as added above which are not called for. That after adding the addition, DVO arrived at the cost of construction and thereafter, he added 1.5 per cent for builders effort, the amount on account of builders effort should have been reduced from the total cost of construction arrived by the DVO and cannot be added. Therefore, the report of the DVO is not reliable at all. It is further argued that the DVO has worked out the cost of construction at the rate of Rs. 582 per sq.ft. After allowing deduction at the rate of 20 per cent by AO, the cost of construction comes at Rs. 466 per sq.ft. We agree with the submission of the ld AR in view of the infrastructure used by the assessee of his own business in the construction of the house property under consideration. Therefore, further deduction of Rs. 25 per cent is allowable. Thus, the difference arrived only at 6.9 per cent, which is negligible. Hence, the additions sustained by the ld. CIT(A) are deleted. Thus, all the three grounds of appeal are allowed. In the result, the appeal of the assessee is allowed both on account legality and on merits.
Issues Involved:
1. Condonation of delay in filing the appeal. 2. Legality of the assessment based on the Departmental Valuation Officer's (DVO) report. 3. Validity of the reference made by the Dy. Director of Income-tax (Investigation) to the DVO. 4. Determination of the cost of construction and related deductions. Issue-Wise Detailed Analysis: 1. Condonation of Delay in Filing the Appeal: The appeal was filed late by one year and ninety-two days. The assessee applied for condonation of delay, explaining that the delay was due to the negligence of his driver, Shri Rajesh Bheel, who was instructed to file the appeal but failed to do so. The assessee lodged an FIR after discovering the lapse. The Tribunal considered the FIR and the explanation provided, noting that the assessee frequently visited Khargone for business, which contributed to the oversight. It was highlighted that the Supreme Court in N. Balakrishnan v. M. Krishnamurthy emphasized that the length of delay is not as significant as the acceptability of the explanation. The Tribunal, exercising its discretion liberally, condoned the delay, acknowledging the reasonable cause presented. 2. Legality of the Assessment Based on the DVO's Report: The assessee contested the assessment framed by the Assessing Officer, which was based solely on the DVO's report. The DVO valued the house property at Rs. 15,28,496 against the declared Rs. 6,91,568. The Tribunal noted that no proceedings were pending when the reference was made to the DVO, rendering the assessment illegal and without jurisdiction. The Tribunal referenced the case of Sarin Bai v. ITO, which established that a reference to the DVO can only be made during pending assessment proceedings. The Tribunal disagreed with the CIT(A)'s finding that the Dy. Director of Income-tax could act as an Assessing Officer under section 2(7A) and section 131(1A), concluding that the reference and subsequent assessment were void ab initio. 3. Validity of the Reference Made by the Dy. Director of Income-tax (Investigation) to the DVO: The Tribunal examined the legality of the Dy. Director's reference to the DVO under section 131(1)(d). It was found that the Dy. Director did not have the jurisdiction to act as an Assessing Officer for the assessee, as per section 120. The Tribunal also noted that the power under section 131(1A) was conferred for different purposes, not for property valuation. The Tribunal cited the Allahabad High Court's decision in Dr. Avinash Kumar Agarwal v. Asstt. DIT, which held that the Assistant Director of Income-tax (Investigation) had no power to refer property valuation to the DVO. Consequently, the Tribunal deemed the reference and subsequent valuation illegal. 4. Determination of the Cost of Construction and Related Deductions: The assessee challenged the DVO's valuation, arguing that the CPWD rates applicable in Delhi were used instead of the local MPPWD rates, which are cheaper. The Tribunal found merit in this argument, referencing the ITAT, Indore Bench's decision in Jagmohan Jaiswal v. ITO, which allowed a 40% deduction for differences in CPWD rates, self-supervision, and direct material purchase. The Tribunal agreed with the assessee's contention that further deductions should be allowed due to the use of the firm's infrastructure and the assessee's experience as a contractor. The Tribunal recalculated the cost of construction, allowing a 25% deduction for the infrastructure used and an additional 10% for the assessee's experience. The final difference was negligible, leading to the deletion of the additions sustained by the CIT(A). Conclusion: The appeal was allowed both on legal grounds and on merits. The Tribunal condoned the delay in filing the appeal, declared the assessment based on the DVO's report illegal, invalidated the reference made by the Dy. Director of Income-tax (Investigation), and recalculated the cost of construction, resulting in the deletion of the additions.
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