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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 ..... erence 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. Penalty u/s 271(1)(c) - Held that:- In this case, the assessee failed to furnish fully and accurately all particulars of expenditure said to be incurred for the land development. The clarification given by the assessee is not sufficient to substantiate or develop any confidence so as to hold that assessee-company has actually incurred any expenditure in land development. Even if any deduction is claimed b the assessee wrongly but bonafide and no malafide can be attributed, the penalty would not be levied. If there is a deliberate concealment and false/inaccurate return was filed, which was revised after the assessee was exposed of the falsehood, it would attract penalty. Further, where the claim made in the return appears to be ex facie bogus, it would be treated as a case of concealment or inaccurate particulars and penalty is to be levied. We may also take note of the observation of the Supreme Court in the case of Union of India vs Dharmendra Textile Processors [2008 (9) TMI 52 - SUPREME COURT ], wherein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gment 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 DVO is bad in law and consequently, the assessment framed is also bad in law. He also observed that the provisions of sec. 142A is not applicable to refer the stock-in-trade for valuation by DVO so as to apply sec. 69B of the Act. Only the investments could be valued by DVO in terms of sec. 142A of the Act. Against this finding of the CIT(A), the Revenue is in appeal before us. 4. We have considered the rival submissions on either side and also perused the material available on record. Identical issue came up for consideration before the Co-ordinate Bench in the case of M/s Legend Estates Pvt Ltd. vs DCIT in I.T.A.No. 1542/Hyd/2010, for ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 to add any amount on the presumption that the cost/investment in construction is low. Thus, without rejecting the books of account regularly maintained, the addition cannot be made only on the basis of the DVO's report. We further find that the assessee has supplied requisite information to DVO and also produced before Assessing Officer which he ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 even after the insertion of s.142A, the AO should have reason to believe that any income chargeable to tax has escaped assessment as provided under s. 147 and thereafter only the notice for reassessment can be issued under s. 148. Even after the insertion of s.142A, there is no amendment in the language of s. 147. Therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment. 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 Sections 69A 69B is required to be made. Whether any income can be taxed by deeming the value of investment not disclosed, are issues where such types of questions arise while some proceedings are pending for assessment. In absence of such proceedings, the Assessing Officer cannot refer any pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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 Act is not covered under the powers of Sec.142A of the Act and this issue is squarely covered in favour of the assessee and against the Revenue by the decision of Hon'ble Delhi High Court in the case of AAR PEE Apartments (P) Ltd. (supra). The Hon'ble Delhi Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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 any bullion, jewellery or other valuable articles referred to in s. 69A or 69B is required. There is no mention about s. 69C of the Act. As is clear from the above, s 69A deals with unexplained money. Sec. 69B likewise relates to the amount of inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 should have been specifically mentioned in s. 142A of the Act. 16. From the reading of sub-s.(1) of s. 142A, it is clear that the legislature referred to the provision of ss. 69, 69A and 69B but specifical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e'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 ₹ 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 by the assessee-company and the land was also not in the possession of the assessee-company or Managing Director and there was no details of nature of development work carried out by the assessee. The Assessing Officer observed that it was only agricultural land and the vouchers for the land development expenses said to be incurred were dated before 20.4.2005. However, the properties were acquired from 5.8.2005 to 20.10.2005. From the same, the Assessing Officer came to the conclusion that the expenditure was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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-company. When no service has been rendered by the Managing Director showing the receipt from assessee-company in his hands as income and paying tax thereon, does not disentitle the Assessing Officer from levy of penalty u/s 271(1)(c) of the Act of the Act. We have examined the penalty proceedings. In our opinion, the order of the Assessing Officer imposing penalty was without any blemish and there was no cause for interfering in it by the CIT(A). The reasons given by the CIT(A) in deleting the penalty are totally ..... X X X X Extracts X X X X X X X X Extracts X X X X
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