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TMI Blog2014 (9) TMI 496X X X X Extracts X X X X X X X X Extracts X X X X ..... tained subsequently - If the administrative CIT could not exercise jurisdiction U/S 263, relying upon Girdhar Gopal Gulati vs Union Of India And Anr. [2004 (4) TMI 45 - ALLAHABAD High Court] the CIT(A) had no jurisdiction in appeal proceedings to call for a valuation report, which is the exclusive prerogative of the AO. Reference u/s 142A is not allowed after assessment or re-assessment - The AO has no jurisdiction to invoke section 142A after assessment or re- assessment - the CIT(A) also ceases to have any jurisdiction to press sec. 142A into service either himself directly or indirectly through the AO -the basic pre-requisite of sec.142A is satisfaction of the AO - When the AO makes a reference at the behest of the CIT(A), the valuation report so obtained has no legal validity and has to be ignored - as the assessment is already completed, the AO has no jurisdiction to make the reference u/s. 142A of the Act - the CIT(A) has clearly overstepped his jurisdiction and hence the order of enhancement by the CIT(A) has no legal sanction – Decided in favour of assessee. Undisclosed investment determined by AO – Amount added to cost of construction of hospital building - Held that:- Ide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hapur was started during the FY 2002-03 and the completed in FY 2003-04. The hospital was inaugurated in the month of January, 2004. 4. The Assessing Officer disagreed with the cost of construction shown by the assessee and by taking into account comparable cases, worked out the actual cost of construction at ₹ 80,45,650 and made an addition of ₹ 15 lakhs by giving the following reasons: "3.7 The assessee furnished a reply dated 23.12.2006 stating that the cost of construction declared by her is ₹ 63,99,186/- including building of ₹ 56,58,839/- and electrical fittings of ₹ 7,40,347/-. She further claimed that out of the total plinth area of 19,807 sq. ft. the basement occupies 3470 sq. ft. and the cost of construction of the basement cannot be at par with other areas. She stated that the cost of basement floor is approximately ₹ 130/- to ₹ 150/- per sq. ft. Further, she claimed that the construction was taken up under her husband's personal supervision, which involved savings at the rate of 15% on the total cost. 3.8 The above arguments of the assessee were carefully examined. Since the assessee has failed to produce all the bil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.2.2008 referred the case to the Assessing Officer for a Remand Report to be submitted after getting the valuation of the hospital done from District Valuation Officer and also gave a direction that the report should be properly confronted by the assessee. 7. The Remand Report along with the valuation report made by the Chief Engineer in charge of valuation was submitted to the AO on 1st October, 2013 after confronting the assessee. The entire report was sent to the assessee who gave her counter submissions. The issue of enhancement of income emanating out of the enhanced valuation by the Chief Engineer was also confronted to the assessee. The CIT(A) observed from the DVO's report that the 4th floor was constructed after December, 2006 and, therefore, it should not be taken into account for this assessment year. The official valuer's report was challenged by the assessee who reiterated the stand that original valuation report was correct and no enhancement was called for. 8. The CIT(A) concluded as under: "4.9 Given the above major discrepancies and the detailed and scientific methods of valuation adopted by the Chief engineer based on CBDT guidelines, I hold that I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over nearly two years. Thus the CIT(A) held that the fact is further proven by the conclusive evidence wherein just before issue of cheque an amount of ₹ 3.3 lakhs which is much more than the cumulative withdrawals of the last two years had been deposited. The CIT(A) held that it is very clear from the above that the transaction is not genuine and section 68 of the Act has been rightly applied in the case of the assessee. Accordingly, he sustained the addition made by the Assessing Officer. 11. The next ground of appeal before us relates to the addition of ₹ 1,26,185 given by the husband of the assessee. During the appeal proceedings the assessee agreed that she had voluntarily admitted to the disallowance of ₹ 6 lakhs, but at the same time the assessee could not explain the difference of ₹ 1,26,185/-. Following are the written submissions of the appellant: "Addition on account of capital : The total capital introduced was ₹ 14,25,185/-, out of which ₹ 6 lakhs was admitted and an amount of ₹ 5,99,000/- represents the cost of land transferred. This leaves a balance of ₹ 2,25,185/-. The Assessing Officer accepted ₹ 1,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bad in law. (v) The learned CIT (Appeals) overlooked the fact that only the AO could make a reference to the Valuation Officer in terms of section 142A of the JT Act and that too for the purpose of making an assessment or reassessment consequent to which no reference was permissible after the assessment was made. Thus, the learned CIT (Appeals) grievously erred in directing the AO to make a reference ignoring the provisions of law in this behalf. Consequently, the addition sustained and enhancement made to the cost of construction based on the ova's report are devoid of any merit. (vi) The learned CIT (Appeals) erred in calling for the report of the Valuation Officer while under section 142A the AO alone could do this if he was satisfied that the cost of construction was under stated or suppressed and where an estimate of cost was required. Therefore, the addition sustained and enhancement made to the cost of construction based on the DVO's report is bad in law. (vii) The learned CIT (Appeals) failed to notice that the AO had no material or evidence to show that the provisions of section 69A applied to the case of the appellant even after conducting survey under sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstruction admitted. Consequently, the cost of construction in the DVO's report was excessive by ₹ 25,80,000 on this count alone (ix) The learned CIT (Appeals) deducted the cost of the fourth floor from the DVO's report since the same did not exist during the year but erred in not deducting proportionately the cost of services added in the report. 4. The learned CIT (Appeals) erred in confirming disallowance of depreciation on office equipment at ₹ 7,123, hospital equipment at ₹ 3,724 and computers at ₹ 2,260 on the ground that the purchases were not substantiated. 5. The learned CIT (Appeals) erred in confirming the addition of ₹ 1,26,185 despite leading evidence that the amount was paid by the appellant's husband. 6. The learned CIT (Appeals) erred confirming the loan of ₹ 3,30,000 from the appellant's father as unexplained credit even though the identity and creditworthiness of the creditor was beyond doubt and the genuineness of the transaction was beyond dispute. 7. The learned CIT (Appeals) erred in confirming disallowance of ₹ 1,44,930 made on ad hoc basis at 1/5th of the hospital expenditure debited to the profi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 15 lakhs as undisclosed investment u/s 69. Further the AO referred to a few comparable cases and the AO consulted SE (Valuation). It was submitted that when the assessee preferred an appeal against this addition, the CIT(A) ought to have confined to the merits of this addition. Instead the CIT(A) asked the AO to refer the matter to the Valuation Officer and after obtaining a report from the DVO the CIT(A) made enhancement. It was submitted that, in other words, the CIT(A) issued a direction to the AO to make a reference u/s 142A and acted upon the report obtained thereafter and in view of the specific language of sec. 142A, the CIT(A) clearly overstepped his jurisdiction. The counsel relied on the following decisions for the proposition that the valuation report was invalid: (i) In CIT v. Umiya Co-operative Housing Society Ltd. 314 ITR 272, the Court held that the AO had no jurisdiction to refer any property to the Valuation Officer for valuation unless proceedings for assessment or re-assessment were pending. (ii) In Tarawati Devi Agarwal v. ITO (1987) 30 Taxman 589 (Cal), it has been held as under: "Valuation is a question of opinion and unless there is a clear f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Income-tax (Appeals). In the case of Subhash Chand Chopra v. Asst. CIT [2005) 92 TTJ 1087, this Bench of the Tribunal has held that no material or evidence having been recovered during the course of search showing investment in construction, the Assessing Officer was not competent to make a reference to the DVO under section 142A and to make addition on that basis. " (v) In CIT v. Kalaivani (2008) 296 ITR 515 (Mad) addition of investment in a commercial complex was deleted because it was based on the report of the DVO without any supporting material. (vi) In CIT v. Suraj Devi 328 ITR 604 Del, the High Court referred to the judgment in K. P. Varghese v. ITO [1981] 131 ITR 597 (SC) and reiterated that it is settled law that the primary burden of proof to prove understatement or concealment of income is on the Revenue and it is only when such burden is discharged that it would be permissible to rely upon the valuation given by the DVO; that the opinion of the DVO, per se, is not an information and cannot be relied upon as held by the Supreme Court in Asst. CIT v. Dhariya Construction Co. 328 ITR 515 (SC). (vii) In the case of Aerens Infrastructure & Technology ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be felt only when there is some material with the AO to show that whatever estimate the assessee has shown is not correct or not reliable. The use of the word 'require' is not superfluous but signifies a definite meaning whereby some preliminary formation of mind on objective basis by the AO is necessary, which requires him to make a reference to the DVO under section 142A." (ix) In Girdhar Gopal Gulati v. UOI (2004) 269 ITR 45 (AIl.), the High Court held that where an assessment was completed after detailed enquiry U/S 143(3), valuation report obtained subsequently by the AO cannot justify action U/S 263. (x) In Elel Hotels & Investments Ltd. v. CIT (2005) 2 SOT 659 (Mum.), it has been held that the CIT(A) does not get jurisdiction to do certain acts for which the AO did not have the jurisdiction. 17. The learned DR has relied on the decision of Madras High Court in the case of CIT vs. Prasad Productions Pvt. Ltd. (133 Taxman 501) wherein it was held as follows: The scope of the appellate power under the Income-tax Act was considered in the decisions of the Supreme Court in CIT v. Kanpur Coal Syndicate (1964) 53 ITR 225; Jute Corpn of India Ltd. v. CIT [1991] 187 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to in section 69A or section 69B [or fair market value of any property referred to in sub-section (2) of section 56] 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." 19. The decision relied on by the learned DR in the case of Prasad Productions Pvt. Ltd. (supra) is not applicable to the facts of the present case since in that case, the AO had not accepted the assessee's valuation of plots owned by it but had made an estimate of the same and on appeal, the assessee urged that the WTO should be directed to refer the valuation of the said property to the valuation cell. The CIT(A) accepted the contention of the assessee and directed the Assessing Officer to get valuation done by the valuation cell u/s. 16(A) r.w.s. Rule 3D. In the instant case the CIT(A) erred in directing the Assessing Officer to refer the matter to the valuation cell. On the other hand, the CIT(A) himself could have referred the valuation of the building to the valuation cell. The subtle difference between Prasad Productions Pvt. Ld. (supra) and the present case is to be noted. 20. In the case of the assessee, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstruction as per the assessee worked out to ₹ 286 per s. ft. whereas as per the approved valuer's report it was ₹ 301 per s. ft. In para 3.5 of the assessment order, the AO observed that the cost shown by the assessee was low. She noted that the cost was not less than ₹ 400 to ₹ 450 per s. ft. She also consulted the SE (Valuation) who also confirmed the cost of construction was ₹ 400 in F.Y. 2002-03 and ₹ 450 next year. She relied on some comparable cases also. Then she issued a show cause notice asking the assessee to state her objections to adopt the cost of construction at ₹ 450 per s. ft. Para 3.7 of the assessment order refers to the assessee's reply wherein she stated that out of plinth area of 19,807 s. ft. basement was 3,470 s. ft. the cost of which was only about ₹ 130 to ₹ 150 per s. ft. She also said that her husband was an engineer and so her savings on that score were substantial and not less than 15% of the total cost. In para 3.8, the AO partly accepted the assessee's explanation and adopted cost of basement at ₹ 200 per s. ft. In regard to the balance area of 16,337 s. ft., she adopted the cos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... creditor and genuineness of the transaction are proved by the assessee and hence the assessee has discharged her onus. Relying on the decision of the jurisdictional High Court in the case of R.B. Mittal (243 ITR 283) we are of the opinion that this addition is to be deleted as the assessee had satisfactorily proved the criteria laid down in the Supreme Court decision. 28. The next ground relates to the addition of ₹ 3.30 lakhs. The AO held that the credit was not proved and the CIT(A) agreed with the AO observing that the transaction was not genuine. Before us the learned counsel for the assessee reiterated the argument as in the case of loan given by the assessee's father that the Revenue authorities cannot ask the assessee to prove the source of source. 29. We have heard both the parties. Identity of the creditor, the creditworthiness of the creditor and genuineness of the transaction are proved by the assessee and hence the assessee has discharged her onus. Relying on the decision of the jurisdictional High Court in the case of R.B. Mittal (243 ITR 283) we are of the opinion that this addition is to be deleted as the assessee had satisfactorily proved the criteria la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sworn statement at the time of survey that her husband and her father are looking after the financial matters. 34. We find that her father Sri Vara Prasada Rao has filed a confirmation letter before the Assessing Officer. It has been stated by him that he has retired as Dy. General Manager from Power Grid Corporation in June 2002 and that he received the retirement benefits of ₹ 12,76,876. Shri Vara Prasada Rao had also stated that he had withdrawn the amount earlier and had given it to persons who had asked for some finance and later when his daughter wanted finance for construction of the hospital building, he had collected the amounts from those people who had taken loans in cash and had deposited in the bank account and had issued cheque to his daughter. 35. We are of the opinion that it is but natural that a father would help his daughter in time of need and Sri Vara Prasada Rao has confirmed the same. The creditworthiness and identity of the person giving the credit to his daughter has been proved and relying on the decision of R.B. Mittal v. CIT, as reported in 246 ITR 283, and the Revenue authorities cannot ask the source of source to be proved. Hence this ground i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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