9911796707
TMI Blog2011 (5) TMI 409X X X X Extracts X X X X X X X X Extracts X X X X ..... ld refer for valuation of the investment concerned to the VO, where is the question of his sitting in judgment in the matter, i.e., without having the informed opinion of the expert, expressed after considering all the relevant materials, including the assessee's explanations the books having been found relevant, though not bearing the full cost of construction. Taxability of excess investment u/s 68B - relevant assessment year - Section 69B mandates the deeming of unexplained investment made during a particular year as the assessee's income for that year. As such, there is no scope whatsoever to treat the entire unexplained investment as having been made during the current year. The assessee's books of account clearly show the investment as being made since financial year 1997-98. - Decided in favor of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... making a general remark as: 'On enquiry it was found that the value of the building was around Rs. 80 lakhs. The WDV of the building as per the assessee's accounts…' The same, it is contended, is only a bald statement, not giving rise to the formation of a belief as to escapement of income from assessment. The Inspector of the Income-tax, through whom the survey at its premises in September, 2002 was carried out by the I.T.O., TDS, Trivandrum, is not competent to issue any authentic or reliable estimate of the investment and, accordingly, reliance thereon is misplaced. Toward the same, the assessee relies on the decision by the Tribunal in the case of Shree Goverdhan Builders v. I.T.O. [2009] 29 SOT 72 (JP) (URO). We have perused the said order as well as the impugned order in the present case. Firstly, the ground on which the assessment was struck down in the cited case was that the reassessment notice issued by the Assessing Officer was prior to the report from the DVO obtained on reference under section 142A thereto, so that there was no material before the Assessing Officer at the relevant time and, therefore, no reason to believe that there was under-valuation and, co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs (P.) Ltd. [2007] 291 ITR 500/161 Taxman 316 (SC)]. Satisfaction, it may be appreciated, is essentially a subjective phenomenon, so that what is principally to be seen is whether it is based on some objective material or not; the sufficiency or the correctness of the material being not relevant at that stage. It would be open to the assessee in the assessment proceedings to show that the assumption of facts at the time of issue of notice was erroneous, and that no addition and/or disallowance is actually called for. That would, however, even if so, not invalidate the notice issued under section 148 [ref: inter alia, Raymond Woollen Mills Ltd. v. I.T.O. [1999] 236 ITR 34 (SC)]. Of course the material has to be credible, and the Assessing Officer cannot rely on pure guess work. It is true that the Inspector, on whose report, the report by the ITO (TDS), Trivandrum, forwarded to the Assessing Officer, is stated to be based, is not competent to value the cost of construction of the building. In this regard, however, the relevant material is not on record, so that it is impermissible to give credence to any such contention. Further, even for argument's sake, the question, in our view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inference in any manner. We decide accordingly. This would also answer, i.e., apart from Ground No. 1, the first limb of the assessee's Ground No. 4. 3.3 As regards the decision relied upon, as afore-discussed, the same is on a different set of facts. The report by the registered valuer stood submitted by the assessee to the Assessing Officer prior to the issue of notice under section 148, which was neither controverted by the Assessing Officer nor referred by him to the DVO, reference to whom, as also noted earlier, was found by the Tribunal as invalid. The decision by the Tribunal in the case of ITO v. Agencies Rajasthan (P.) Ltd. [2008] 117 TTJ (Jp.) 542/[2009] 28 SOT 29 (URO) is also on the same footings. The observation by it (in the former case) that the Inspector's report could not be said to be a material to form a belief; the law not postulating any qualification for such material, except for its credibility and nexus with the belief, the correctness of which cannot be doubted, and the sufficiency of which cannot be subject-matter of debate, has therefore, to be understood and read in the context of the facts and circumstances of that case, and cannot be said to be either ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a fair procedure, which would only require that the entire material on which the assessee places reliance is properly considered and, likewise, the material and/or information that the authority relies on (or wishes to place reliance on), is confronted to the assessee. In fact, the VO is himself required to consider the assessee's case and explanations, including - though not limited to - its books of account. When the law itself considers that the Assessing Officer may not be as proficient or possess the requisite expertise, so that he could refer for valuation of the investment concerned to the VO, where is the question of his sitting in judgment in the matter, i.e., without having the informed opinion of the expert, expressed after considering all the relevant materials, including the assessee's explanations & the books of account. This would amount to turning the logic (of the reference) on its head. We shall exemplify this by way of an example. The assessee's books show purchase of a particular quantity and quality of (say) wood. The Assessing Officer has no basis to verify the completeness or correctness of the same. It is only when the construction is actually inspected, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... includes the power to direct the audit of the assessee's accounts, considering their nature and complexity. The Legislature only deemed it fit to incorporate the provision of reference to VO, not as a sub-section of section 142 but as a separate section, following it. In other words, the same is only to be considered as a part of the enquiry before assessment undertaken by the Assessing Officer, albeit through a designated expert in valuation, and toward gathering material and information, which is in his opinion relevant for the purpose of framing the assessment. How far different, it may be asked, is the provision different, i.e., in character, from that requiring audit of accounts which is also only from a designated expert. The only difference that we observe is that while the purport of section 142 is toward making an assessment, section 142A is applicable only where the value of investment, referred to in sections 69 and 69B, is required for making an assessment, i.e., is limited in scope vis-à-vis the former. 4.3 We may next address the question of whether the rejection of accounts is a prerequisite for invocation of section 69 or section 69B. Section 69 is in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alidity of the application of the provision (section 69B) depend. Again, therefore, the assessee's books of account having been duly considered, we do not find or consider that there is any requirement in law for 'rejection of accounts' prior to invocation of section 69B. Section 69 and section 69B are, in fact, para materia; the latter being only an extension of the former. This is as it would be clearly defeative of the law if while an undisclosed investment can be brought to tax, a partly undisclosed, not. All that one would have, therefore, to do is the record the investment in books at ludicrously low, or whatever, values; the investment being disclosed, so that it could not be brought to tax. Intrinsic to the concept of disclosure is the disclosure at full value, and this is what section 69B is toward. The law, per the said provisions, itself contemplates that the assessee's books of account, which must ordinarily be regarded as a true and correct record (of all the transactions entered into by him), may not be so qua any credit (section 68) and debit (sections 69, 69A, 69B and 69C) entries and, accordingly, empowers the Assessing Officer to deem it as his income where, and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Similarly, where the Revenue has evidence that the investment (made during the year) is not recorded in the assessee's books of account, or partially recorded, the difference, where not satisfactorily explained, may be deemed as his income. That is, the said sections represent specific rules of evidence, statutorily mandated. If the books of account were themselves to be taken as a final proof of the transactions reflected therein, the said sections would not hold, and no addition thereunder possible [refer: CIT v. S. Kamaraja Pandian [1984] 150 ITR 703/18 Taxman 187 (Mad.)]. Why, even section 145(3) itself contemplates that the books of account of the assessee may not be correct or complete, or otherwise inconsistent with the accepted accounting standards, so that the income cannot be assessed on the basis thereof. The books of account or other documents are, thus, definite pieces of evidence, and would require being considered on merits, as any other, and there is no requirement in law to separately impugn the same for the purpose of invoking the provisions of sections 68 to 69C; the same being implied in the application of the said sections, the ingredients of which stand, inclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and steel directly at cheaper rates (refer: para 7 Annexure B to the VO's Report). Surely, this reduction is only on the strength of the books of account and other materials produced by the assessee, and which has also been considered by the Assessing Officer. Clearly, therefore, it cannot be said that no reliance has been placed by the Revenue authorities in assessing the value of the investment, and in adopting the same, on the assessee's books of account and other supporting documents. (also refer para 7 of this order). 4.5 In view of the foregoing, the assessee's contention is neither valid legally or in the facts of the case; the books having been found relevant, though not bearing the full cost of construction. 5. We, next, consider the assessee's objection that the valuation has been made on the basis of Central Public Works Department (CPWD) rates rather than the Kerala PWD rates, and for which reliance is placed on the decision in the case of Asstt. CIT v. Unniamma Andrew (in I.T. Appeal No. 487/Coch./2004, dated 4-8-2005), wherein the Tribunal has relied on the decision by the Hon'ble Rajasthan High Court in the case of CIT v. Dinesh Talwar [2004] 265 ITR 344 and CIT v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evance qua non-adoption of the Kerala PWD rates. We decide accordingly, disposing the second limb of the assessee's ground #4. 6. The last issue qua the impugned addition raised by the assessee's appeal is in respect of consideration of the entire excess investment as for the relevant assessment year, per Gd. #3. We find the same as valid. Section 69B mandates the deeming of unexplained investment made during a particular year as the assessee's income for that year. As such, there is no scope whatsoever to treat the entire unexplained investment as having been made during the current year. The assessee's books of account clearly show the investment as being made since financial year 1997-98. Though labour, which only would convert material into 'civil construction', stands expended in no insignificant manner only from financial year 1999-2000 onwards, that would not be of much consequence as construction can be considered as commenced from that year. The valuation report states the period of construction as from September, 1999 (to March, 2002). Nevertheless, the investment made during financial years 1997-98 and 1998-99 would have to be considered as in those years. This aspect h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent has been made prior to the commencement of the relevant previous year. Also, it would not matter if the liability arising against the said material has been discharged by the assessee or not; the fact of purchase itself amounting to incurring of expenditure toward the investment. We decide accordingly. 7. We may finally advert to the case law relied upon by the assessee, i.e., to the extent not already considered in the foregoing discussion, even though the same stand already perused. The first is the decision in the case of CIT v. Pratapsingh Amrosingh Rajendra Singh & Deepak Kumar [1993] 200 ITR 788/[1992] 64 Taxman 585 (Raj.), holding reference to VO in view of the proper books of account maintained by the assessee, invalid. The said decision is distinguishable on facts qua several grounds. Firstly, is the finding by the VO that proper books of account have not been maintained, and which he cites as the reason for not following the accounting method. In fact, the full details of measurements and detailed drawings were also not made available, with reference to which only the estimate of quantities of various items could be verified with the bills/vouchers, and which were al ..... X X X X Extracts X X X X X X X X Extracts X X X X
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