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TMI Blog2014 (4) TMI 424X X X X Extracts X X X X X X X X Extracts X X X X ..... A is a process after the initiation of the assessment proceedings. Relying upon Umiya Co-operative Housing Society Ltd. v ITO [2005 (3) TMI 382 - ITAT AHMEDABAD-B] - A reference to DVO u/s. 142A can be made only when a requirement is felt by the AO for making such reference. Requirement would arise or could be felt only when there is some material with the AO to show that whatever estimate assessee has shown is not correct or not reliable - The use of word ‘require’ is not superfluous but signifies a definite meaning whereby some preliminary formation of mind by the AO is necessary which requires him to make a reference to the DVO u/s 142A - It can only be during the course of pendency of assessment or reassessment that the AO frame his mind to refer the property to valuation cell of the Department - if there is a basis to think that the assessee may have understated the cost of construction or whatever is declared by him in this regard is not believable - reference to valuation cell u/s. 142A can be made during the course of assessment and reassessment and not for the purpose for initiating assessment –Decided against Revenue. - ITA No. 1581/Hyd/2013, ITA No. 1582/Hyd/2013 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. The CIT (A) ought to have appreciated the action of the AO that the disallowance on claim of expenditure on bricks was based on the impounded registers and that the expenditure recorded in these registers is much lower than the expenditure debited to the P L account. 3. Since facts are similar in both the years, the facts as narrated in A.Y. 2008-09 are taken. There was a survey u/s. 133A of the Act at the premises of the assessee on 23.08.2006. During the course of survey, certain payments and stocks were found to be unverifiable from the existing records. Accordingly, the matter was referred u/s. 142A by the AO to the DVO. The DVO furnished the valuation report of construction at Rs. 55,83,06,733. According to the assessee's books of account the cost of construction was Rs. 38,58,53,602. The difference was worked out at Rs. 17,24,54,131. The difference was apportioned among the FYs 2004-05 to 2008-09 and the amount attributable to the assessment year under consideration was Rs. 2,51,50,267. The AO made this addition u/s. 69 of the Act. The AO observed that the assessee made investment in the immovable properties to the extent of Rs. 6,81,14,338 and the amount expende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no reference to any material/evidence/information on the basis of which it could be said that the cost of construction was shown by assessee was understated or anything above what was disclosed by assessee in the books of account. It is a clear cut case that the assessee has produced the books of account but the Assessing Officer has not rejected or no defect was pointed out in the books of account regarding cost of construction of the project before reference to the DVO. We further find from the case records that even before verifying the books of account regularly maintained and without pointing out any defects in the books the cost of construction was referred to DVO. We are of the view, on the basis of evidences produced before us, that the assessee has regularly maintained books of account and various records along with supporting evidences of various raw materials like cement, steel, bricks, sand, wood, labour cost, sanitary wares etc. but the AO has not found out any defect in the books/records/bills etc. and has not rejected books of account. Without causing any defects in books regularly maintained and without rejecting the books u/s. 145, of the Act there is no reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty to valuation cell of the Department. Such mind can be framed if there is a basis to think that the assessee may have understated the cost of construction or whatever is declared by him in this regard is not believable. Therefore, it is quite apparent that reference to valuation cell u/s. 142A can be made during the course of assessment and reassessment and not for the purpose for initiating assessment. This view is clearly supported by the decision of Ahmedabad Bench in the case of Umiya Co-operative Housing Society Ltd. v ITO (2005) 94 TTJ 392 (Ahd), wherein it is held as under:- 7. From the above, it is evident that s. 142A empowers the AO to require the valuation officer for making the estimate of the value of any asset provided the AO, required the same for the purpose of making the assessment or reassessment. He above provision does not empower the AO to refer the matter to the DVO for gathering information for reopening of assessment. Making the reassessment and reopening of assessment are two different things. 8. When the process of reopening of assessment ends and the assessment is validly reopened thereafter the process of making reassessment starts. Therefore ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the valuer and an opinion of a third party cannot be a reason to believe of the ITO. The Hon ble Bombay High Court in the case of Jamnadas Madhavji and Co.(supra) have held that the Assessing Officer cannot issue summons u/s. 131 for the purpose of making investigation for reopening of the assessment. 9. In view of the above, we are of the opinion that the issue of notices u/s. 148 in all three years under consideration was not in accordance with law. We, therefore quash the notices issued u/s. 148 and consequently the assessments completed in pursuance to notices u/s. 148 are also quashed. Since the assessment itself has been quashed, the grounds raised by both the parties with regard to the merits of the additions for undisclosed investments in the house property need no adjudication at this stage because once the assessment is cancelled, the addition does not survived. Mr. Bhatt has mainly emphasized on Section 142A of the Act. He submits that the Assessing Officer at any time can make reference to the Valuation Officer for valuing the property for the purpose of assessment or reassessment, where the value of any investment referred to in Section 69 or Section 69B or S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and in accordance with Sec. 145 where books of account are required to be rejected by pointing out some apparent defects. In our considered view the provisions of Sec. 142A cannot be read in isolation to Sec. 145. In other words, if books of account are found to be correct and complete in all respect and no defect is pointed out therein and cost of construction of building is recorded therein, then the addition on account of difference in cost of construction could not be made even if a report is obtained within the meaning of Sec. 142A from the DVO. It is because the use of the report of the DVO obtained u/s. 142A is not mandatory but is discretionary as the word used is may therein. Accordingly, we are of the considered view that in the present case when AO has not rejected the books of account by pointing out any defects reference to the DVO will not be valid and, therefore, DVO s report could not be utilized for framing assessment even if such a report is considered to be obtained u/s. 142A. Since reference to DVO being held as invalid, the assessment/ reassessment framed thereafter would also be invalid. Even otherwise, the issue of unexplained expenditure u/s. 69C of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he provisions of s. 142A. Hence the decision of Hon ble Supreme Court in the case of Smt. Amiya Bala Paul (supra) will still apply to hold that no addition can be made merely relying upon the value arrived at by DVO. In view of the above discussion, addition of Rs. 19,69,881 is directed to be deleted. 7. We are in agreement with the aforesaid interpretation given by the Tribunal to Sec. 142(A) of the Act. Our discussion on this aspect proceeds as under: 8. Sec. 142(A) is to the following effect:- 142A. For the purposes of making an assessment of reassessment under this Act, where an estimate of the value of any investment referred to in s 69 or s. 69B or the value of any bullion, jewellery or other valuable article referred to in s. 69A or s. 69B is required to be made, the AO may require the Valuation Officer to make an estimate of such value and report the same to b him. 9. It is clear from the reading of sub-s.(1) of this provision that it enables the AO 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 s. 69 or s. 69B or the value of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he is given wider meaning as sought to be made out, the provisions of s. 69C shall be rendered otiose. 15. The learned counsel for Revenue however took another plea to buttress her submission. He submitted that having regard to the circumstances under which s. 142A was inserted by the Finance Act, 2004, it be deemed that the intention of legislature was to include even those un-explained expenditure stipulated in s. 69C. No doubt the need behind inserting s. 142A was to empower the AO to make a reference to the Valuation Officer as there was no such specific powers and existing provision contained in s. 131 were inadequate. However, even this statement of object and reason 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 CBDT circular issued by it explaining the Finance Bill, 2004 which specifically omits the word expenditure as well as s. 69C. It is on this basis that the s. 142A was inserted in the form as it appears on the statute book now. If the intention was to include unexplained expenditure as contemplated in s. 69C of the Act as well this provision sho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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