2002 (4) TMI 218 - AT - Income Tax

Summary

Issues Involved:
1. Jurisdiction to reopen the assessment under section 147 of the Act.
2. Validity of the reference to the Valuation Cell by the Assessing Officer (A.O.).
3. Maintenance and production of books of account by the assessee.
4. Justification for the enhancement of the cost of construction by the CIT(A).

Detailed Analysis:

1. Jurisdiction to Reopen the Assessment under Section 147 of the Act:
The assessee challenged the reopening of assessments on the ground that the original assessments were framed under section 143(3) after examining the books of account. The Tribunal noted that the reopening was based on the D.V.O.'s report, which was obtained after the original assessments were completed. The Tribunal held that reopening based on the D.V.O.'s report is not permissible when the assessee's books of account were duly maintained and examined during the original assessments. This position is supported by various judicial precedents, including CIT v. Pratapsingh Amrosingh, Rajendra Singh & Deepak Kumar [1993] 200 ITR 788 (Raj.) and others.

2. Validity of the Reference to the Valuation Cell by the A.O.:
The Tribunal found that the reference to the Valuation Cell was made on 11-12-1990, after the original assessments were completed. The Tribunal concluded that the A.O. had no jurisdiction to make such a reference when no proceedings were pending before him. The Tribunal emphasized that as per section 133 of the Act, the A.O. can require information only during the pendency of proceedings. The Tribunal also noted that there was no approval from the Commissioner for making the reference, as required by the second proviso to section 133(6). Consequently, the Tribunal held that the reference to the Valuation Cell and the subsequent reopening of assessments were invalid.

3. Maintenance and Production of Books of Account by the Assessee:
The Tribunal addressed the issue of whether the assessee maintained proper books of account. The Tribunal found that the books of account were produced during the original assessments and were verified by the A.O. The Tribunal noted that the assessee had lodged a complaint with the police regarding the loss of books of account, and there was no evidence to suggest that this complaint was false. The Tribunal criticized the CIT(A) for disregarding the evidence of the books of account being maintained and produced, including the order sheets from the Sales-tax Department. The Tribunal concluded that the CIT(A)'s finding that the assessee did not maintain books of account was incorrect and unsupported by the record.

4. Justification for the Enhancement of the Cost of Construction by the CIT(A):
The Tribunal examined the CIT(A)'s decision to enhance the cost of construction based on the D.V.O.'s report. The Tribunal found that the CIT(A) based the enhancement on the incorrect assumption that the assessee did not maintain books of account. Since the Tribunal established that the books of account were maintained and verified during the original assessments, it held that the CIT(A)'s basis for enhancement was flawed. The Tribunal also noted that the assessee provided evidence, such as agreements and inspection reports, showing that the ground and first floors were already constructed before the assessee acquired the property. The Tribunal found that the CIT(A) failed to consider these documents properly. Therefore, the Tribunal concluded that the CIT(A) was not justified in enhancing the cost of construction and the original cost declared by the assessee should have been accepted.

Conclusion:
The Tribunal allowed the appeals, holding that the reopening of assessments was invalid, the reference to the Valuation Cell was without jurisdiction, the assessee did maintain proper books of account, and the enhancement of the cost of construction by the CIT(A) was unjustified.