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TMI Blog2012 (8) TMI 157X X X X Extracts X X X X X X X X Extracts X X X X ..... here was any other evidence to disbelieve the expenditure shown by the assessee. In fact the seized documents pertaining to this company were duly confronted vide questionnaire and the reply furnished thereof satisfactorily explains the transactions recorded therein which have been verified vis-à-vis books of account/Balance Sheet - as can be seen from a comparison of the valuation by the assessee with that of the DVO the variation is only 3.86 % which is a very minor variation - As AO did not examine the variations, with specific reference to any items of expenditure that were unreasonable additions made cannot be warranted - in favour of assessee. - ITA 195/2012, ITA 196/2012, ITA 197/2012, ITA 198/2012, ITA 199/2012, ITA 203/2012, - - - Dated:- 27-7-2012 - MR. JUSTICE S. RAVINDRA BHAT, MR. JUSTICE R.V. EASWAR, JJ. For Appellant: Sh. N.P. Sahni, Sr. Standing Counsel and Sh. Ruchesh Sinha, Advocate, for Revenue. For respondent: Dr. Rakesh Gupta, Sh. Ashwani Taneja, Ms. Rani Kiyala and Sh. Piyush Singh, Advocates. MR. JUSTICE S. RAVINDRA BHAT (OPEN COURT) 1. The revenue has preferred these batch of appeals, claiming to be aggrieved by a common decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of construction as disclosed in the returns and cost of construction estimated by the District Valuation Officer for each year. Aggrieved, the assessee preferred a first appeal where detailed explanations and documents were filed by it. The CIT(A) called for AO s remand report and after consideration of the material available struck of the additions. It was held by the Commissioner (A) that the reference under Section 142-A (to the valuation officer) was not valid, since the AO did not advert to any specific defects in the books of accounts maintained and audited and his presumption that some expenses mentioned in seized documents on account of construction were not completely recorded in the books of accounts was not found correct when they were explained by the appellant and verified by the Assessing Officer with the supporting evidence corroborating the books of accounts. Since Assessing Officer had also not rejected the books of accounts under Section 145(3), by pointing out any defect, the reference to the DVO was not valid and therefore, his report could not be used for framing assessment under Section 143(3) read with Section 153A of the Act, even if such report were conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were later explained in writing before AO during assessment. As a result there was no justification for him to seek recourse to reference to DVO, since no unexplained materials existed. 9. It was submitted that during assessment proceedings, the assessee had reconciled the alleged incriminating evidence and explained that they were recorded in the books of account of the various group entities. The AO s order was silent on this and did not discuss this material and relevant facts. Thus, the assessee duly discharged its burden in respect of incriminating materials, as regards the amount of ₹ 40 crores, and by furnishing adequate explanation about the incriminating material which was not controverted or dealt with by the AO. In view of these facts, no addition could be made. The books of account offered by the assessee, were audited. Therefore, the AO could not have sought recourse to valuation under Section 142-A of the Act, without first rejecting it, or at least recording what was wrong or defective with such books (of account). 10. At the outset, this Court notices that the judgment of the Supreme Court in Sargam Cinema v Commissioner of Income Tax (2011) 241 CTR (SC) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o refer the matter to the Valuation Officer for an enquiry by him. 12. Section 142A, which was introduced in 2004, reads as follows: " 142A. For the purposes of making an assessment or reassessment under this Act, where an estimate of the value of any investment referred to in section 69 or section 69B or the value of any bullion, jewellery or other valuable article referred to in section 69A or section 69B is required to be made, the Assessing Officer may require the Valuation Officer to make an estimate of such value and report the same to him." 13. The effect of Section 142-A and the power to make a reference to the DVO, in the context of value of expenditure, was considered by this Court, in another case involving a construction company, in Commissioner of Income-tax v. Aar Pee Apartments P. Ltd. (2009) 319 ITR 206, as follows: It is clear from the reading of sub-section (1) of this provision that it enables the Assessing Officer to get the valuation done from the Valuation Officer in certain specific types of cases. These would be the cases wherein an estimate of the value of any investment referred to in section 69 or 69B or the value of any bullion, jewellery or othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le article, etc. If the contention of learned counsel for the Revenue is accepted and the expression is given a wider meaning as sought to be made out, the provisions of section 69C shall be rendered otiose. The learned counsel for the Revenue, however, took another plea to buttress her submission. She submitted that having regard to the circumstances under which section 142A was inserted by the Finance (No. 2) Act, 2004, it be deemed that the intention of the Legislature was to include even those un-explained expenditure stipulated in section 69C. No doubt the need behind inserting section 142A was to empower the Assessing Officer to make a reference to the Valuation Officer as there were no such specific power and the existing provision contained in section 131 was inadequate. However, even this Statement of Objects and Reasons clearly confined, and limited the reference " to hold a scientific, technical and expert investigation, etc." Learned counsel for the assessee has drawn our attention to the Central Board of Direct Taxes circular issued by it explaining the Finance (No. 2) Bill, 2004, which specifically omits the word " expenditure" as well as section 69C. It is on this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons with other concerns, and have been explained satisfactorily. Therefore, no adverse inference is drawn 4. As regards the disallowability of interest as per the provisions of section 36 (1)(iii) of the IT Act, the issue has been examined and no adverse inference is drawn. 5. The seized documents pertaining to this company were duly confronted vide questionnaire dated 08-9-2009 and the reply furnished thereof satisfactorily explains the transactions recorded therein which have been verified vis- -vis books of account/Balance Sheet. 16. In view of the above, it is evident that the valuation in this case was uncritically accepted by the AO. As can be seen from a comparison of the valuation by the assessee, with that of the DVO, the variation is 3.86 %. This is a very minor variation, having regard to the large amounts involved. Besides, the fact that the AO did not examine the variations, with specific reference to any items of expenditure that were unreasonable, or showed wide variation, these differences can also be put down to differing perceptions, and the practice adopted by the concerned business activity. 17. In view of the above discussion, and having regard to t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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