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2010 (6) TMI 483 - AT - Income TaxUnaccounted investment Addition of Rs.43, 59, 881 out of Rs.2, 18, 26, 105 - The first legal issue raised is that the cost of construction was referred to the DVO without pendency of any proceedings u/s.153C of the IT Act for A.Y.2005-06 - On the basis of evidences that the assessee has regularly maintained books of account and various records along with supporting evidences of various raw materials like cement steel bricks sand wood labour cost sanitary wares etc. but the AO has not found out any defect in the books/records/bills etc. and has not rejected books of account - Without causing any defects in books regularly 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 Referring the matter to the DVO u/s.142A of the Act for the purposes of estimating the cost of construction u/s.69 of the Act - It is quite apparent that reference to valuation cell u/s.142A can be made during the course of assessment and reassessment and not for the purpose for initiating reassessment - From the reading of sub-s.(1) of s. 142A it is clear that the legislature referred to the provisions of ss. 69 69A and 69B but specifically excluded 69C - In fact during the course 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 - If the intention of the Legislature to include unexplained expenditure as contemplated in Sec.69C of the Act the provision of Sec.142A should have been specifically mentioning the same Decided in the favour of the assessee and against the revenue
Issues Involved:
1. Validity of reference to the DVO (District Valuation Officer) without pending proceedings. 2. Applicability of Section 142A to Section 69C of the Income-tax Act. 3. Quantum of valuation and adjustments made by CIT(A). 4. Admission of additional legal grounds. Issue-wise Detailed Analysis: 1. Validity of Reference to the DVO Without Pending Proceedings: The assessee contended that the reference to the DVO for cost of construction was made on 31-07-2007, before the notice under Section 143(2) was issued on 01-08-2007. The CIT(A) found that the reference to the DVO was valid as there was an ongoing proceeding under Section 153C for the assessment year 2005-06. The Tribunal, however, concluded that no proceedings were pending at the time the reference was made to the DVO. It emphasized that the reference under Section 142A should be made only during the pendency of assessment or reassessment proceedings. The Tribunal cited the case of Umiya Co-operative Housing Society Ltd., where the Hon'ble High Court held that the Assessing Officer cannot refer any property for valuation if no assessment or reassessment proceedings are pending. 2. Applicability of Section 142A to Section 69C of the Income-tax Act: The Tribunal examined whether Section 142A could be invoked for estimating the value of unexplained expenditure under Section 69C. The Tribunal referred to the decision of the Hon'ble Delhi High Court in CIT v. AAR Pee Apartments (P) Ltd., which held that Section 142A does not extend to estimating unexplained expenditure under Section 69C. The Tribunal agreed with this interpretation, noting that Section 142A specifically mentions Sections 69, 69A, and 69B but excludes Section 69C. Therefore, the reference to the DVO for estimating unexplained expenditure under Section 69C was deemed invalid. 3. Quantum of Valuation and Adjustments Made by CIT(A): The CIT(A) had restricted the addition made by the Assessing Officer from Rs. 2,18,26,105 to Rs. 43,59,881 after considering various deductions and adjustments. The Tribunal noted that the Assessing Officer did not reject the books of account maintained by the assessee, nor did he find any defects in them. The Tribunal emphasized that without rejecting the books of account, the addition based solely on the DVO's report was not justified. It also highlighted that the DVO's report was not final and that the rates adopted by the DVO were arbitrary and not based on actual bills and records provided by the assessee. 4. Admission of Additional Legal Grounds: The Tribunal admitted the additional legal grounds raised by the assessee, which were not initially included in the appeal. These grounds challenged the reference to the DVO without pending proceedings and the applicability of Section 142A to Section 69C. The Tribunal found these grounds to be purely legal and based on existing facts on record. The Tribunal decided to adjudicate these legal grounds, ultimately ruling in favor of the assessee. Conclusion: The Tribunal allowed the appeal of the assessee, concluding that the reference to the DVO was invalid as no proceedings were pending at the time of the reference. It also held that Section 142A does not apply to estimating unexplained expenditure under Section 69C. Consequently, the Tribunal found the additions made by the Assessing Officer to be unwarranted. The appeal of the Revenue was dismissed, and the issues on merits were deemed academic and not adjudicated.
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