2004 (12) TMI 318 - AT - Income Tax

Summary

Issues Involved:
1. Interpretation of the proviso to section 142A inserted by Finance Act, 2004 with retrospective effect.
2. Validity of the addition made by the Assessing Officer based on the Departmental Valuation Officer's (DVO) report.
3. Deletion of addition made under section 68 by the Assessing Officer.

Detailed Analysis:

1. Interpretation of the Proviso to Section 142A:
The primary issue in this appeal revolves around the interpretation of the proviso to section 142A, which was inserted by the Finance Act, 2004 with retrospective effect. The proviso states:
"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."

The assessee's counsel contended that the use of a comma after '2004' and before 'and' makes the proviso disjunctive, implying it applies to cases where assessments were made on or before 30th September 2004 and had become final and conclusive. The Departmental Representative (DR) opposed this view, arguing that the comma is a usual legislative practice and does not change the meaning. The Tribunal concluded that the proviso excludes only concluded assessments from the retrospective application of section 142A to avoid hardships, and the legislative intent was to apply the section retrospectively to pending cases. Thus, the proviso does not apply to pending matters, and the reference made by the Assessing Officer to the DVO is valid.

2. Validity of the Addition Based on DVO's Report:
The second issue concerns the addition of Rs. 12,81,468 made by the Assessing Officer based on the DVO's valuation of the construction cost. The CIT(A) had reduced this addition to Rs. 1,12,382 after inspecting the building and finding errors in the DVO's report. The Tribunal upheld the CIT(A)'s findings, noting that the DVO applied outdated CPWD rates from 1976 with indexation instead of the revised 1992 rates and incorrectly calculated the RCC structure area and projections. The Tribunal found no reason to interfere with the CIT(A)'s factual findings, which were uncontroverted by the DR.

3. Deletion of Addition under Section 68:
The third issue pertains to the deletion of an addition of Rs. 3 lakhs made by the Assessing Officer under section 68. One of the partners, Shri H.C. Bhatia, had introduced Rs. 9.5 lakhs into his capital account, out of which the Assessing Officer accepted Rs. 6.5 lakhs but added Rs. 3 lakhs for two sums credited without producing the bank passbook. The CIT(A) deleted this addition, noting that Bhatia was a regular assessee, had introduced money via cheque/DD, and the Assessing Officer had accepted a major portion of his contributions. The Tribunal upheld the CIT(A)'s decision, finding no infirmity in the observations and noting that the evidence supported Bhatia's contribution.

Conclusion:
The Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s order on all issues. The proviso to section 142A applies only to concluded assessments made on or before 30th September 2004, and pending cases are subject to the retrospective application of section 142A. The CIT(A)'s findings on the DVO's valuation errors and the deletion of the addition under section 68 were found to be justified and uncontroverted.