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TMI Blog2019 (2) TMI 2103X X X X Extracts X X X X X X X X Extracts X X X X ..... .11.2004 declaring a loss of Rs. 57,73,025/-. During the course of assessment proceedings, the Assessing Officer asked various details as per page 2 and 3 of the assessment order. The assessee filed the written reply on 13th February, 2006. The assessee also produced the books of account which were examined by the Assessing Officer. During the course of assessment proceedings, the Assessing Officer observed that it has started production w.e.f. 4th February, 2004 only. Further, the assessee company has disclosed total investment in factory building during the year at Rs. 1,81,08,728/- and, in support of the same, no valuation report or detailed building account was filed. Therefore, the Assessing Officer deemed it proper to make a reference u/s 142A of the IT Act, 1961 to the Valuation Officer of the Department to work out cost of construction of the factory building. The DVO determined cost of the factory building at Rs. 5,64,07,000/- as against the cost of construction of Rs. 1,81,08,729/-. He further noted that the value declared by the assessee as cost of construction includes development expenses of Rs. 18,81,388/- which is not construction cost. Therefore, the cost of constru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the CIT(A), the assessee as well as the Revenue are in appeal before the Tribunal by raising the following grounds:- ITA No.2370/Del/2008 "1. That the ld.CIT(A) has erred in law and facts of the case in deleting the addition of Rs. 2,83,25,411/- on the ground that valuation officer inspected the building on 21.08.2006 and report was given as on 03.03.04 while some construction was also made between 01.04.2004 to 21.08.2006. The Assessing Officer has made addition of Rs. 4,01,79,6591/- after considering the report of the valuation officer. Hence order of Assessing Officer may be restored. 2. the Assessing Officer has made addition to the tune of Rs. 20,00,000/- as share application money in the three share holders after giving proper opportunity to the assessee co. as unexplained share application money. The ld.CIT(A) has deleted the addition in view of fact that the identity, genuineness and credit worthiness of the parties have been established. Hence the ld.CIT(A) has erred in law and facts of the case in deleting the addition." ITA No.1992/Del/2008 1. That having regard to the facts and circumstances of the case, Ld. CIT (A) has erred in law and on facts in not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the appeal order by making addition of Rs. 4,60,856/- being the estimated cost of construction of RCC roof of the oil tank instead of deducting the same, thus leading to double addition o1 Rs. 9,21,712/- and has further erred in not granting the appropriate relief as sought by the assessee in this regard. 5C That having regard to the facts and circumstances of the case, Ld. CIT (A) has erred in law and on facts in not giving relief on account of over estimation of cost of construction of Compound Wall (Boundry Wall) and has further erred in not granting the appropriate relief as sought by the assessee in this regard. 5D That having regard to the facts and circumstances of the case, Ld. CIT (A) has erred in law and on facts in not accepting the rates of construction of under ground water tank at Rs. 0.75 PL as shown by the registered valuer of the assessee company and has further erred in accepting the rates given by Ld. DVO at Rs. 3.25 PL that too without and basis, material or evidences and has further erred in not granting the appropriate relief as sought by the assessee in this regard. 5E That having regard to the facts and circumstances of the case, Ld. CIT (A) has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asis of some CPWD circular in suppression of his earlier findings of taking 7.5% deduction as reasonable after considering all facts and circumstances in his order dated 24/3/2008. 5. Under the circumstances of the case the Commissioner of Income Tax (Appeal), Bareilly has erred in law in allowing relief to the assessee on account of over valuation of Compound wall by wrongly considering this issue again u/s 154 and allowing relief of Rs. 6,03,022/- to the assessee in wrong manner. 6. Under the circumstances of the case the Commissioner of Income Tax (Appeal), Bareilly has erred in law and on the facts in accepting the assessee's statement regarding rate of construction of water tank by wrongly considering this issue again u/s 154 and directing the Assessing Office in wrongful manner to adopt the rate of underground water tank at 0.75 PL(adopted by registered valuer of assessee) as against the rate of 3.25PL (adopted by DVO in his report) 7. Under the circumstances of the case the Commissioner of Income Tax (Appeal Bareilly has erred in law and on the facts in accepting the rate of construction and capacity in respect of oil tank by wrongly considering this issue again u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ash Chandra Gupta (2014) 105 DTR 295 (All); (iii) CIT & Ors. Vs. Asha Chaurasia & Ors. (2017) 98 CCH 85 (All); (iv) Nirpal Singh vs. CIT (2013) 359 ITR 398 (P&H); (v) Pr. CIT vs. Sanjay Hiralal Thakkar (2016) 97 CCH 168 (Guj); and (vi) CIT vs. Vijaykumar D. Gupta (2014) 365 ITR 470 (Guj). 9. He accordingly submitted that since the Assessing Officer in the instant case has not rejected the books of account before referring the matter to the DVO, therefore, the same is not in accordance with the law. Referring to the order of the CIT(A), the ld. counsel for the assessee drew the attention of the Bench to the findings given by the CIT(A) wherein he has categorically held that he finds merit in the arguments of the ld. counsel for the assessee that the action of the Assessing Officer in making reference to the DVO is not in accordance with the law. However, at the same time, the ld.CIT(A) deviated from his finding and upheld the action of the Assessing Officer on the ground that the assessee has not produced complete books of account for which the Assessing Officer could not examine and determine the detailed and correct cost of construction of the factory building. Referring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - in the first order and deleted the balance amount. Subsequently, in the order passed u/s 154, the ld.CIT(A) gave some further relief. It is the submission of the ld. counsel for the assessee that the Assessing Officer, without rejecting the books of account first could not have referred the matter to the DVO u/s 142A of the IT Act. We find the ld.CIT(A) while deliberating on this issue at page 41 to 45 of his order has observed as under:- " I have carefully considered the written submissions made by AR, perused the assessment order and other material on records. It is observed that the main objection of the AR is that the action of AO to make a reference to the D.V.O is not in accordance with law and the facts of the case. According to him, even after the insertion of section 142A, it is a condition precedent for A.O. to give a finding that the books of account of the appellate are defective and the cost of construction can not be ascertained from such defective books of account. Such finding has to be based on material and proper reasoning. On the basis of these finding A.O. is required to first reject the books of account and only thereafter he gets the authority as per law t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce with law for following two reasons namely:- 1. He did not record a finding before making reference to D.V.O that books of account and other records of the appellant Co. produced before him were defective and it was not possible to ascertain the cost of construction from these books of accounts and other records, which was a condition precedent. 2. Even when subsequently A.O. has rejected the books of accounts he has not recorded his findings that as per facts of the case how the books were defective in such a manner that it was not possible to ascertain the cost of construction from the books of account and other records. I have gone through various judgments also referred to by the AR. In many decisions such as 1. CIT vs. Meerut Cement Company (P) Ltd., supra, 150 Taxman 7 (Allahabad). Delivered on 19-04-05. 2. CIT Vs Hotel Joshi 242 ITR 478 (Raj) it has been held that if the assessee maintained books of account in regular course of business and necessary entries related to the expenses incurred towards cost of construction are properly made in the books of accounts, they are produced for verification and their correctance is not doubted then these shou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he reference by the AO to the Valuation Officer and no grievance arose to the appellant by merely making a reference to a Governmental authority, an expert on the subject. This ground of appeal fails." 13. From the various replies given by the assessee during the course of assessment proceedings vis-à-vis a perusal of the findings given by the CIT(A) shows that the Assessing Officer in the instant case has not rejected the books of account before making a reference to the DVO on 5th April, 2006. We find the Hon'ble Allahabad High Court in the case of Lucknow Public Educational Society (supra) has held that u/s 142A(1) the assessing authority cannot refer the matter to the DVO without first rejecting the books of account. Relevant observation of the Hon'ble High Court at para 18 to 20 of the order read as under:- "18. The issue for consideration is, whether the Assessing Officer, under Section 142A (1), can refer a matter to the Valuation Officer, for the purpose of making an estimate of such value. Under sub-section (3) of Section 142A, it is provided that on receipt of the report of the Valuation Officer, the Assessing Officer may, after giving the assessee an o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... All these appeals have arisen from judgment and order dated 21.10.2014 passed by Income Tax Appellate Tribunal, Lucknow Bench ''B', Lucknow (hereinafter referred to as the "Tribunal") in Income Tax Appeals No. 437/LKW/2013, 439/LKW/2013, 440/LKW/2013 and 761/LKW/2013 and relates to Assessment Years 2005-06, 2007-08, 2008-09 and 2004-05, respectively. 3. Substantial question of law formulated in these appeals reads as under:- "Whether the Hon'ble ITAT has erred in law as well as in the facts and circumstances of the case in holding that the books of account has to be rejected before referring to the D.V.O. u/s 142A and ignoring the decision in case of Bharathi Cement Corporation Ltd. Vs. CIT - 253 CTR 98 (AP) and the decision rendered by the division bench of Uttrakhand High Court in case of CIT Vs. Bhavani Shankar Vyas - 311 ITR 8 (Uttrakhand)." 4. It is submitted that a similar question has already been decided by this Court against Revenue in Income Tax Appeal No. 205 of 2015 (Commissioner of Income Tax-I, Kanpur Vs. M/s Sahyog Jan Kalyan Samiti, Kanpur) decided on 06.09.2016 following Supreme Court judgment in Sargam Cinema Vs. Commissioner of Income Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has not produced the books of account completely as per requirement of the Assessing Officer is concerned, the same is contrary to the facts. The finding of the CIT(A) shows that the assessee has maintained regular books of account. The reply of the assessee before the Assessing Officer as well as the observation given by the Assessing Officer in the body of the assessment shows that the assessee has produced the books of account. We find the Assessing Officer, at page 3 of the order has mentioned as under:- "On 13.02.2006 assessee filed a written reply. Books of Accounts produced and examined with." 16.1 Similarly, the Assessing Officer at page 5 of the order has observed as under:- "Assessee has filed written replies to the queries raised in various dates. In view of written replies filed and details produced, the manufacturing and trading results disclosed are not disturbed." 17. Therefore, under the facts and circumstances of the case, the observation of the CIT(A) that the assessee has not produced the complete books of account for the perusal of the Assessing Officer is incorrect. 18. In view of the above discussion, we hold that no addition can be made on the basi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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