2019 (4) TMI 48 - AT - Income Tax

Condonation of delay of 1274 days - earlier AR advised that substantial relief got from the CIT(A), hence there is no need to appeal further - HELD THAT - Each case of delay has to be evaluated based on the facts available on record. We notice that the earlier AR has objected before CIT(A) only in completing the assessment based on DVO value u/s 142A. But, assessee has approached the present AR who has brought on record the other technical failure on the part of the AO, who completed the assessment u/s 143(3) rws 147. On verification of those issues for which assessee has appealed before us raising grounds of appeal. On initial observation, we notice that assessee has a favourable case, on merit. Considering the above decision of COLLECTOR, LAND ACQUISITION VERSUS MST. KATIJI AND OTHERS 1987 (2) TMI 61 - SUPREME COURT and reasons for delay in filing the appeal submitted before us, only for the rendering of justice, we condone the delay in filing the appeal before us on the ground that the assessee was prevented by reasonable cause in filing the appeal belatedly. Reference to the Valuation Cell u/s 142A - reopening of assessment u/s 147 based on DVO report- reference to DVO without rejection of books of accounts in original proceedings - No information of reference given to asessee - allegation to failure to furnish the information despite sufficient opportunities - difference between the value determined in valuation report and the value accounted for in books of account - HELD THAT - AO has not rejected the books nor informed the assessee that he is not accepting the valuation submitted by them or value adopted by them in the balance sheet are not proper. Without any hint, he has completed the assessment u/s 143(3). Even though, the reference was made to DVO on 17/11/2008, the assessee came to know only on 21/08/2009, when the DVO contacted the Assessee to submit various information to carryout inspection. Respectfully following the ratio laid down in the case of Lakshmi Constructions 2014 (10) TMI 223 - ANDHRA PRADESH HIGH COURT we are of the view that the AO must have confronted the issue of not accepting the valuation of assessee and referred the issue to the DVO. In that case, AO can reopen the assessment even though the assessment was completed due to limitation. But, in this case, assessee was never informed about the reference to valuation and the assessment was completed. The completed assessment cannot be reopened without rejecting the books or confronting with assessee about not accepting the valuation submitted by assessee and the completed assessment cannot be re-visited on the same information available on record. Therefore, in our view, reopening was bad in law and, therefore, the reopening of assessment is quashed in all the appeals under consideration. - decided in favour of assessee.

Summary

Issues Involved:
1. Delay in filing appeals by the assessee.
2. Validity of reassessment proceedings initiated by the Assessing Officer (AO).
3. Reference to the Departmental Valuation Officer (DVO) without rejecting the books of accounts.
4. Merits of additions made towards the cost of construction of properties.

Issue-Wise Detailed Analysis:

1. Delay in Filing Appeals by the Assessee:
The appeals were filed with a delay of 1274 days. The assessee claimed the delay was due to reliance on the advice of the previous authorized representative, who suggested that no further appeal was necessary as partial relief was granted by the CIT(A). The department initiated recovery proceedings, prompting the assessee to seek new representation, which led to the realization that the entire assessment was not maintainable. The Tribunal, referencing the Supreme Court's decision in the case of Collector, Land Acquisition Vs. MST. Katiju, condoned the delay to ensure justice, emphasizing that substantial justice should prevail over technical considerations.

2. Validity of Reassessment Proceedings:
The reassessment was initiated based on a DVO report after the original assessment was completed. The AO did not reject the books of accounts or express any doubt on the expenditure incurred on the factory buildings during the original assessment. The Tribunal noted that the AO must first express a lack of confidence in the books before referring to a DVO, as established in cases like Sargam Cinema Vs. CIT. The Tribunal found that the AO did not follow this procedure, making the reassessment invalid.

3. Reference to the DVO Without Rejecting the Books of Accounts:
The Tribunal observed that the AO referred the matter to the DVO without rejecting the books of accounts or indicating any suspicion about the valuation during the original assessment. The Tribunal cited precedents, including Sargam Cinema and Lakshmi Constructions, to assert that the AO should have first rejected the books before making such a reference. Since this procedure was not followed, the Tribunal concluded that the reassessment based on the DVO's report was not justified.

4. Merits of Additions Made Towards the Cost of Construction of Properties:
The Tribunal addressed the specific additions made for the properties at Roorkee and Hyathnagar. For the Roorkee property, the CIT(A) provided partial relief, excluding the cost of the second floor constructed in subsequent years. For the Hyathnagar property, the CIT(A) also provided partial relief, noting that the DVO incorrectly assumed both buildings were constructed in the same year. The Tribunal found that the DVO's estimates were based on the details provided by the assessee and physical inspections, but since the reassessment itself was invalid, the additions became infructuous.

Conclusion:
The Tribunal quashed the reassessment proceedings as they were initiated without rejecting the books of accounts and were based solely on the DVO's report. Consequently, the additions made in the reassessment were also invalidated. The appeals filed by the revenue were dismissed as infructuous, and the appeals filed by the assessee were allowed. The stay applications filed by the assessee were dismissed as infructuous.