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TMI Blog2016 (3) TMI 1055X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. As per the DVO's report, the valuation of the business asset was done by the DVO by determining the cost of construction at Rs. 28,16,77,000/- as against the admitted cost of construction of Rs. 26,38,53,630/-. Thus, there was a difference of Rs. 1,78,23,640/-. The Assessing Officer made an addition of Rs. 1,75,00,000/- u/s 69B of the Act towards this discrepancy. The assessee challenged this addition before the CIT(A) stating that the provisions of sec. 142A is not applicable for valuation of stock-in-trade as held by the Supreme Court of India in the case of Sargam Cinema vs CIT, [2010] 328 ITR 513. The assessee also relied on the judgment of the Allahabad High Court in the case of CIT vs Lucknow Public Educational Society, [2011] 339 ITR 588 for the proposition that before reference to DVO, the Assessing Officer is duty bound to reject the books of account of the assessee in terms of sec. 145(1) of the Act. The CIT(A) observed that first of all, the Assessing Officer has not rejected the books of account before referring the mater to DVO for valuation. If the Assessing Officer straight away refers the matter to DVO without rejecting the books of account, the reference to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese two was worked at Rs. 17,24,53,131/- which was spread over to 5 assessment years. The unexplained expenditure relating to this assessment year 2007-08 was worked out at Rs. 6,51,01,056/-. Perusal of the assessment order shows that there 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 M/s. Legend Estates Pvt. Ltd. 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, la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39; is not superfluous but signifies a definite meaning whereby some preliminary formation of mind by the Aa is necessary which requires him to make a reference to the DVO u/s142A. 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. 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 assessment or reassessment. He above provision does not empower the AO to refer the matter to the DV ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uage of section 147. Therefore, the condition prescribed u/s.147 for reopening of assessment still exists. The Hon'ble Gauhati High Court in the case of Bhola Nath Majumdar and the ITAT Jodhpur Bench in the case of Vi jay Kumar (supra) have taken the view that the valuation report is only an opinion 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. M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be made during the course of other proceedings or a report of the DVO is available to the AO before making an assessment or reassessment then same can be utilized only in accordance with sub-Sec.(3) of Sec. 142A i.e., the assessee has to be given an opportunity of being heard before such a report is utilized 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, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 69C of the Act. Admittedly, in the present case the expenditure on construction are claimed and allowed as revenue expenditure and cannot be considered as an investment or bullion, jewellery etc. referred in s. 69, s. 69A or s.69B, of the Act. We accordingly hold that the reference to DVO is not in accordance with the 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has to be in the context of investments made in some property or any other type of investment and it could not be the business expenditure. The word 'investment' contained in s. 69B deals with investment in bullion, jewellery or other valuable articles, etc. if the contention of learned counsel for Revenue is accepted and the 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 unexplained 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 iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot disturb the concluded assessments of other assessment years. Accordingly, we decide this issue in favour of the assessee and against the Revenue. 14. In view of the above decision on both the legal issues, we decide this appeal of the assessee in favour of the assessee and the issues on merits have become academic and needs no adjudication." 5. In view of the above decision of the Co-ordinate Bench, we are inclined to decide the issue in favour of the assessee and against the Revenue. 6. In the result, the Revenue's appeal I.T.A.No.1794/Mds/2012 is dismissed. I.T.A.No.1575/Mds/2012 A.Y 2008-09 7. In this appeal for assessment year 2008-09, the Revenue has challenged the deletion of penalty levied u/s 271(1)(c) of the Act. 8. The facts of the case are that the assessee claimed payment of development charges of Rs. 59,77,000/- in respect of land sold to Smt. Soundaram and Smt Seema Sinha. The assessee produced only vouchers signed by the Managing Director of the Company. The assessee has not given full particulars of land development work carried out by the assessee. The land development work said to be carried on by the Managing Director was prior to purchase of land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, the assessee took a plea that before acquisition of land, there were certain development expenditure to be incurred. On this reason, the Managing Director of the assessee incurred the expenditure and since there was no sufficient funds in the hands of the assessee, he has not submitted the bills to the assessee-company. This amount has been shown as receipt in the hands of the Managing Director of the assessee and paid tax thereon voluntarily, therefore, no penalty could be levied, according to the ld. Counsel. However, the vouchers submitted by the assessee before the Assessing Officer are only self-made vouchers and they do not bear full details of the expenditure. The Assessing Officer observed that the details of the services rendered by the Managing Director were not disclosed, the expenditure was incurred before acquisition of the land by the assessee and the circumstances under which the payment was made without disclosing the nature of services rendered. It is nothing but wrong claim made by the assessee. It is interesting to know that the CIT(A) put its stamp of approval that it is common to incur such expenditure by Managing Director on behalf of the assessee-compan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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