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2017 (6) TMI 1147 - AT - Income TaxEstimation by Valuation Officer - validity of assessment - Held that - As law stood as on this assessment years under consideration, Section 142A cannot be applied and no reliance can be placed on that provisions for these assessment years. Consequently, the assessments framed on the said DVO s report cannot be upheld. In view of this, we are inclined to annul these assessments for all these three assessment years which is wholly based on DVO s report which was obtained under Section 142A of the Income Tax Act. Accordingly, all the three appeals for assessment years 1995-96, 1996-97 & 1997-98 are allowed. Since we have quashed the assessments itself, we are not going into the other arguments and grounds raised by the assessee as well as by department in these appeals. Levy of penalty u/s 271(1)(b) - Held that - The assessment order for the year under consideration was passed with the participation of the assessee s counsel. Further, the penalty was levied for non- reply of notice dated 03-01-2006 posting the case for hearing on 16-01-20016. However, there is no reference of assessee s failure to comply with this notice in the assessment order. Thus, it leads to conclusion that the assessing officer was able to complete the assessment u/s 143(3) though assessee has not complied this notice and no prejudice caused to A.O. In our opinion, it is not appropriate to levy penalty mechanically for such technical breach of provisions of the act. Accordingly, we are of the opinion that this is not a fit case to levy penalty u/s 271(1)(b) of the act and we delete the penalty levied under Section 271(1)(b) of the Act by assessing officer and confirmed by the CIT(A).
Issues Involved:
1. Sustaining of additions made towards the cost of construction in respect of Injambakkam and Sholinganallur properties for the assessment years 1995-96, 1996-97, and 1997-98. 2. Levy of penalty under Section 271(1)(b) of the Income Tax Act for the assessment year 2003-04. Detailed Analysis: Issue 1: Sustaining of Additions towards Cost of Construction The appellant challenged the additions made towards the cost of construction of properties at Injambakkam and Sholinganallur. The Assessing Officer (AO) had taken the cost of construction at ?82.29 lakhs for Injambakkam and ?117.45 lakhs for Sholinganallur, treating the balance of ?110.96 lakhs as undisclosed investment. The CIT(A) determined the total cost of construction at ?74.36 lakhs for Injambakkam and ?102.95 lakhs for Sholinganallur. The Tribunal remitted the matter back to the AO, directing independent enquiry and appraisal of the cost of construction, considering the DVO report as supportive material. The AO, in compliance, determined the total cost of construction at ?80,00,000 for Injambakkam and ?1,00,00,000 for Sholinganallur, citing the appellant's failure to furnish documentary evidence. The CIT(A) directed the AO to consider the balance amount as undisclosed investment for the relevant assessment years. The appellant contended that proper accounts were maintained, and complete details of construction were furnished. The AR highlighted discrepancies in the DVO’s report, such as incorrect assumptions regarding the construction period and inflated estimates for marbles, internal water supply, and architect fees. The Tribunal noted that the AO based the assessment solely on the DVO’s report, contrary to the Tribunal's earlier direction. The Tribunal emphasized that Section 142A of the Income Tax Act, which allows reference to the Valuation Officer, cannot be applied retrospectively for the assessment years under consideration. Consequently, the assessments framed on the DVO’s report were annulled, and the appeals for the assessment years 1995-96, 1996-97, and 1997-98 were allowed. Issue 2: Levy of Penalty under Section 271(1)(b) The appellant challenged the levy of penalty under Section 271(1)(b) for non-compliance with a notice under Section 142(1) during the assessment year 2003-04. The AO issued a notice calling for various details, which the appellant failed to furnish, leading to the initiation of penalty proceedings. The CIT(A) confirmed the penalty, stating that the appellant did not show compliance with the notice. The appellant argued that the income declared was accepted under Section 143(1) and later under Section 143(3), and there was no default on its part. The AR pointed out that the penalty order referred to an alleged notice of hearing on 16.01.2006, which was not received. The Tribunal observed that the assessment was completed with the participation of the appellant's counsel, and there was no loss of revenue to the government. The Tribunal concluded that it was inappropriate to levy a penalty mechanically for a technical breach and deleted the penalty levied under Section 271(1)(b). Conclusion: The appeals for the assessment years 1995-96, 1996-97, and 1997-98 were allowed, annulling the assessments based on the DVO’s report. The appeal for the assessment year 2003-04 was also allowed, deleting the penalty levied under Section 271(1)(b).
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