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TMI Blog2003 (11) TMI 309X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee on 18th June, 1992, in which the Department had seized the books of account and other relevant records of the business of the assessee. After search, the Dy. CIT, Special Range I, Lucknow, who was authorised to complete assessment in respect of the assessee, issued a notice under s. 148 of the Act on 12th Feb., 1993, for asst. yr. 1989-90, copy appearing at p. 68 of the paper book and also issued a notice under s. 142(1) of the Act on 5th July, 1994, copy appearing at p. 69 of the paper book, calling for the necessary information in respect of asst. yr. 1989-90. It is also on record that after making proper enquiries, the AO dropped the notice issued under s. 148 of the Act by passing an order on 7th March, 1995, copy of which is appearing at page No. 70 of the paper book. 3. For asst. yr. 1990-91, the assessee filed return of income on 18th July, 1992 and income returned was Rs. 1,49,710. It is admitted fact that the assessee filed copies of balance sheet, P&L a/c and all relevant facts relating to construction of building "Rohit Bhawan" upto 31st March, 1990 and the AO, who is again same, Shri Sudhakar Tiwari, Dy. CIT, Special Range I, Lucknow, completed assessment on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a basis to correctly ascertain the cost of construction of the said complex. Therefore, it was decided to refer the matter to the District Valuation Officer under s. 131(1)(c) of the IT Act. The DVO had taken a few details from the assessee and a few collected by him on the spot measurement to note the quality of construction and also the period of construction. His report dt. 21st March, 1996, was submitted to the AO; as per report cost of investment in the said complex is Rs. 1,97,64,300 with reference to the covered area of 7,785 sq. mtrs. in the periods relevant to asst. yrs. 1989-90 to 1992-93. The DVO refers to the admitted cost of Rs. 1,01,95,000 by the assessee before him, although no such admission or details in respect thereof were given at the assessment stage. Without prejudice to the resources of admitted cost of investment in the absence of such details on the record, the following year-wise difference emerged between the admitted cost and the determined cost as per DVO. Finance year Actual cost of construction estimated by the Valuation Officer (Rs.) Cost of construction disclosed by the assessee (Rs.) Difference (Rs.) 1989-90 41,29,275 21,30,000 19,99,275 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation under s. 143(1)(a) of the Act and even thereafter, the AO reopened the case of the assessee for asst. yr. 1989-90 by issuing a notice under s. 148 of the Act, but after making necessary inquiry, the AO did not find any substance to proceed with and filed the proceedings for asst. yr. 1989-90. The third plea of the assessee was that there was no proceedings pending before the AO when he made reference to DVO under s. 131(1)(d) of the Act. All these legal pleas were considered and learned CIT(A) did not find substance and rejected the same. After the learned CIT(A) proceeded to decide the issue on merit and after considering all the factual positions regarding objection of the assessee against estimate arrived at by the DVO, the learned CIT(A) gave some relief and decided the appeal vide order dt. 28th March, 2002, which is challenged by the assessee in ITA No. 654/Luc/2002. 8. For asst. yrs. 1990-91 and 1991-92, the assessee raised similar pleas and learned CIT(A) decided the same following her order for asst. yr. 1989-90 and assessee had preferred ITA Nos. 655 and 656/Luc/2002. 9. Shri K.R. Rastogi, FCA, has raised several legal points. Giving out the factual position as st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is trying the suit and similar analogy will be applicable to the AO as the AO can exercise the power under s. 131(1) of the Act, when there is pendency of any proceedings before him. The AO cannot exercise the power under s. 131(1) of the Act before or after conclusion of the proceedings. On the basis of above analogy of law as laid down by different High Courts as well as by different Benches of the Tribunals, the learned counsel submitted that the AO was not justified to make reference when nothing was pending in respect of asst. yrs. 1989-90 to 1991-92. 11. The next plea raised by the learned counsel for the assessee is that the assessee was engaged in the business of construction of multi-storeyed complex and was maintaining books of account duly supported with vouchers. The assessee had been filing returns of income along with all necessary documents. The AO completed the assessment after going through all the material for these three assessment years. It was also submitted that after search under s. 132(1) of the Act, the books of account of the assessee along with all related materials were seized by the Department. Order under s. 132(5) of the Act was framed by the Depar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h A, in ITA Nos. 2137 to 2139/All/1989 in the case of ITO vs. Smt. Parveen Bari, for the asst. yrs. 1984-85 to 1986-87 decided on 29th Feb., 1996, the copy is appearing at pp. 115 to 117 of the paper book, which is also on the same line. The other decision referred to by the learned counsel is Tribunal, Lucknow Bench, in the case of Dy. CIT vs. Janki Prasad Garden Enclave (P) Ltd. in ITA No. 54/All/1999 decided on 28th Feb., 2003, the copy of which is appearing at pp. 135-136. 13. On the basis of these facts, the learned counsel for the assessee submitted that the AO admittedly had not rejected books of account, rather assessments were completed under s. 143(3) in respect of these assessment years before us and without rejecting the books and without recording a prima facie finding that the assessee had understated the cost of construction, the AO cannot make reference to the DVO, and addition on the basis of DVO's report is unwarranted. 14. The other plea of the assessee was that the proceedings have been initiated under s. 147 of the Act by issuing of notice under s. 148 of the Act. The contention of the learned counsel for the assessee is that the assessee had filed returns fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e made basis of information as required under s. 147(b) of the Act to issue notice under s. 148 of the Act. The learned counsel submitted that, no doubt, this is in respect of old provisions of s. 147, but fact remains that the AO has to record reasons to believe and this belief must be based on material, and in the case in hand, the report of the DVO alone was there and as pointed out above, the learned counsel submitted that the said report is not to be looked into as very action of making reference is not in accordance with law. The learned counsel also pointed out that admittedly reference made by the AO to DVO, Kanpur, was under s. 131(1)(d) as evident from the copy of valuation report appearing from pp. 63 to 73 and the Hon'ble Supreme Court of India in the case of Smt. Amiya Bala Paul vs. CIT (2003) 182 CTR (SC) 489 : (2003) 130 Taxman 511 (SC), had laid down that the AO had no authority to make reference to valuation officer for estimating the cost of construction under s. 131(1)(d) of the Act, and additions made on the basis of report of DVO were ordered to be deleted. The contention is that this reasoning is fully applicable to the facts of the case and additions are liab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (c) compelling the production of books of account and other documents; and (d) issuing commissions." 21. The law as laid down by the different High Courts is quite specific on this point that the AO has no authority to issue the commission to DVO or to any one, if no proceeding is pending before him. In the case of Dwijendra Lal Brahamchari & Ors. vs. New Central Jute Mills Co. Ltd. & Anr., the Hon'ble Calcutta High Court was seized with the issue relating to powers of the ITO under s. 131 of the Act and their Lordships have laid down that powers of ITO under s. 131 are co-extensive with that of a Court trying a suit under s. 30 of CPC r/w rr. 12, 14 and 15 of Order 11 of the Court. The officer can summon any document, if any suit is pending before him and not otherwise. This view was approved by Hon'ble Bombay High Court in the case of Jamnadas Madhavji & Co. vs. J.B. Panchal, ITO and material observations of their Lordships are as under: "The officers mentioned in s. 131(1) of the IT Act, 1961, viz., the ITO, AAC, IAC, CIT(A) and CIT are conferred with the same powers as are vested in a Court under the Code of Civil Procedure, 1908, when trying a suit. The Code of Civil Proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the construction of Rohit Bhawan. It means the AO had already applied the mind while making the addition, which was also subject matter of appeal before the CIT(A). 25. The contention of the learned counsel is that unless and until the AO has not pointed out any other defect, he was not justified to make reference to DVO and that contention of the assessee is getting corroboration from the view by the Hon'ble Rajasthan High Court in the case of CIT vs. Shri Pratap Singh, Amro Singh's. Rajendra Singh and the same view was also taken by the different Benches of the Tribunals referred to by the learned counsel and particularly in the case of Modern Construction Development & Project Promotion vs. Asstt. CIT (1997) 63 ITD 235 (Cal). Further, the Hon'ble Madhya Pradesh High Court in the case of CIT vs. S.R. Construction has laid down as under: "Provision as contained under s. 148 is not unruly horse, but is guided on certain conditions. Sub-s. (2) of s. 148 mandates the AO to record his reasons before issuing any notice to make a reassessment. Two conditions must exist; (1) that the ITO has reason to believe that income chargeable to income-tax had been under-assessed; and (2) that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce collected by the assessee is not justifiable. 29. In this connection, it is also relevant to point out that the learned CIT(A) while deciding these legal points had relied upon the decision of apex Court in the case of Pooran Mal vs. Director of Inspection (Investigation) 1974 CTR (SC) 25 : (1974) 93 ITR 505 (SC) and that of CIT vs. Dr. Nandlal Tahiliani (1988) 172 ITR 627 (SC) to substantiate the plea that even if the step of the AO was not justified to make the reference to DVO, the evidence so collected is admissible. That reasoning laid down by their Lordships was in respect of the material, which was seized during the search operation and their Lordships concluded that the Department cannot be prohibited from using such material. The position would have been different in case of the assessee certain incriminating documents leading to unexplained investment not shown in the books of account was detected during the search. Admittedly, it is not the case of the Department and, thus, reasonings relied by the learned CIT were not applicable to the factual position of the case as nothing incriminating was detected at the time of search carried out at the residence and the busine ..... X X X X Extracts X X X X X X X X Extracts X X X X
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