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TMI Blog2012 (10) TMI 619X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO could have formed belief that the assessee-company had not truly disclosed the expenditure of earthwork. The DVO had only raised doubts on the methodology adopted by the assessee for valuation of the earth work. The AO acted casually in discharging his functions. AO did not call the assessee-company to explain the difference as up-front fees to IDBI for sanction of loan & the difference only in the share application money, thus the issuance of notice under Section 148 without calling for the explanation of the assessee on these grounds, and on the material could not be the grounds for reopening the assessment - in favour of assessee. - ITA NO.234, 235 OF 2011 - - - Dated:- 16-10-2012 - Sunil Ambwani, And Aditya Nath Mittal, JJ. 1. We have heard Shri P.K. Jain, Senior Advocate assisted by Shri Amitabh Agarwal for the assessee-appellant. Shri Dhananjai Awasthi appears for the respondents. 2. These Income Tax Appeals under Section 260-A of the Income Tax Act, 1961 (for short, the Act) arise out of a common judgment of the Income Tax Appellate Tribunal, Delhi Bench 'C', Delhi dated 2.7.2010 in ITA Nos. 3616 3617 (Del)/2004, and ITA Nos.3557 3556 (Del)/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the matter to the valuation officer, New Delhi on 10.11.2000 for correct valuation of the investment made by the assessee company. The assessment was completed u/s 143 (3) on 26.03.2001 being time barring case with the finding that after receiving the valuation report it will be examined thoroughly and in necessary, further action will be initiated. Now the valuation report has been received and the Valuation Officer vide his report No. DVO/ND/IT-48/2000- 2001/202 dated 17.12.2001 has observed/commented as under:- (i) The assessee has failed to supply the initial and final levels of the land where such enormous earth work of 6.75 lacs cubic meter has been done. The registered valuer's estimates submitted by the assessee of M/s Rajiv Jain Associates have simply considered the average heights of earth work involved without any actual measurements at site, which can be done only from topographical charts of initial and final levels. In the absence of such details having been furnished by the assessee, the authenticity of such work is doubtful and cannot be verified at this end. (ii) The contention of the assessee that no registration of tractor numbers is required by farmers i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 31,00,000/-. There is a great difference in the closing balance of share application money as per balance sheet and as per copy of accounts/details filed which remained unexplained. 5. Therefore, I have reason to believe that assessee's income escaped from assessment. Action u/s 147 of the I.T. Act is taken. Issue notice u/s 148 of the I.T. Act, 1961. 7. The assessee filed a return under Section 148 on 12.2.2002 declaring 'nil' income. Thereafter, the assessment proceedings were initiated by issuing statutory notices under Section 143 (2) and 142 (1) of the Act. These proceedings were completed on 13.3.2003 determining the total income of the assessee at Rs. 18,624/- by disallowing the interest claimed by the assessee in respect of borrowed funds. The interest was considered as pre-operative expenditure and capitalized for consideration in subsequent years. 8. The assessee filed an appeal, which was partly allowed by CIT (A) on 28.5.2004. Aggrieved both the assessee as well as the revenue filed appeals before the Income Tax Appellate Tribunal. Assessment Year 1999-2000 9. In respect of the assessment year 1999-2000 the assessee filed return on 31.3.2000 showing 'ni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he validity of the reopening of the assessment taken as ground no.1 held that the assessee had not carried out any business activity in the relevant year. It was engaged in land development to set up the factory. The AO was not satisfied with the quantum of expenditure and therefore, in the course of original assessment he referred the matter to DVO for estimating the expenditure. The Tribunal found that the report of the DVO was not received till the completion of the assessment. The AO thus made an office note on the assessment order to the effect that appropriate action shall be taken after the receipt of the valuation report and therefore, it cannot be said that in the absence of full evidence he did not apply his mind properly on the issue. In para 5.2 of the order of the Tribunal it is observed that the DVO's report was received on or about 27.12.2001. The Tribunal agreed that the letter of DVO did not contain the views of the DVO in respect of quantification of the expenditure. He had only expressed doubts over the topographical chart of the site and the methods of getting the work done. He did not put any figure of the expenditure in his letter. His observations related to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he books were never rejected. This aspect has not been considered by the High Court. In the circumstances, reliance placed on the report of the DVO was misconceived. 5. For the above reasons, the impugned judgment of the High Court is set aside and the order passed by the Tribunal stands restored to the file. Accordingly, the assessee succeeds. 6. Civil appeal is allowed. No order as to costs." 15. The judgment in Sargam Cinema vs. Commissioner of Income Tax (supra) has been followed by the Delhi High Court in Commissioner of Income Tax v. Mahesh Kumar, ITA 1192/2010 decided on August 20, 2010 as well as by this Court in Commissioner of Income Tax-II, Agra vs. M/s Satkar Chitralaya Pvt. Ltd (Income Tax Appeal No. 566 of 2009) decided on 5.4.2011. 16. Shri P.K. Jain has also relied upon the judgment of Supreme Court in Assistant Commissioner of Income Tax, Gujarat v. M/s Dhariya Construction Company (Civil Appeal No. 9468/2003) decided on February 16, 2010 in which it was held that the opinion given by the District Valuation Officer per se is not an information for the purpose of reopening assessment under Section 147 of the Income Tax Act, 1961. The AO has to apply his mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer, kept outside the records. The valuation report was received by the Assessing Officer on 17.3.2003 and the assessment order was dispatched on 21.3.2003. 18. From the facts given in the orders of the Income tax authorities, and the Income Tax Appellate Tribunal, it is clear that the opinion of the AO for reassessment under Section 147, was based upon the report of the DVO dated 27.12.2001. Firstly the AO could not have referred the matter to DVO unless he had any doubts over the expenditure after examining the account books of the assessee, and on which he had rejected the accounts. The reference to DVO under Section 142-A is not to make a fishing and roving enquiry into the expenditure in constructions. The AO is not authorised to call for the report of DVO unless he forms an opinion that he cannot rely on the assessee's accounts and rejects the accounts books. In the present case, the accounts book were not rejected. The reference was made to DVO only for the purposes of ascertaining the expenditure on the earth work. The enormity of the earth work, by itself, without any other material on record, could not be a ground to make a reference to DVO. We are of the view, that th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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