IT : Reference to DVO without rejecting book of account is not justified
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[2013] 39 taxmann.com 134 (Allahabad)
HIGH COURT OF ALLAHABAD
Commissioner of Income-tax -I
v.
Institute of Literacy Development*
RAJIV SHARMA AND DR. SATISH CHANDRA, JJ.
IT APPEAL NOS. 180 & 181 OF 2008†
SEPTEMBER 16, 2013
Section 142A of the Income-tax Act, 1961 - Assessment - Estimate by Valuation Officer [Conditions precedent] - Assessment years 2003-04 and 2004-05 - Assessee-society had constructed a building and declared investment in same on basis of report of approved valuer - Assessing Officer made reference to DVO who estimated cost at higher figure - Assessing Officer made addition under section 69B on basis of report of DVO - Whether when assessee had submitted books of account, vouchers, bills of building accounts which were duly examined by Assessing Officer with due application of mind and in books of account, no defect had been pointed out by Assessing Officer, reference to DVO was not sustainable - Held, yes [Paras 8 and 9] [In favour of assessee]
CASES REFERRED TO
Commissioner of Customs (Import) v. Stoneman Marble Industries [2011] 2 SCC 758 (para 7), Kamala Ganapathy Subramaniam v. Controller of Estate Duty [2002] 253 ITR 692/121 Taxman 615 (SC) (para 8) and M. Janardhana Rao v. Jt. CIT [2005] 273 ITR 50/142 Taxman 722 (SC)(para 8).
D.D. Chopra for the Appellant.
ORDER
Dr. Satish Chandra, J. - Both the appeals have been filed by the Department under Section 260A of the Income-Tax Act, 1961, against the common judgment and order dated 27.06.2008, passed by the Income Tax Appellate Tribunal, Lucknow in I.T.A. Nos. 290 and 291/Luc/2008, for the assessment years 2003-04 and 2004-05.
2. On 10.12.2008, a Coordinate Bench of this Court has admitted the appeals on the following substantial questions of law respectively in each appeal:—
"(In ITA No.180 of 2008)
Whether on the facts and circumstances of the case the Income Tax Appellate Tribunal, Lucknow erred in law in deleting the addition of differential cost of construction of Rs.30.08 by holding that any addition made after utilizing the report of the Valuation Officer without the Assessing Officer first rejecting the books of account was not sustainable.
(In ITA No.181 of 2008)
Whether on the facts and circumstances of the case the Income Tax Appellate Tribunal, Lucknow erred in law in deleting the addition of differential cost of construction of Rs.77,77,581.00 by holding that any addition made after utilizing the report of the Valuation Officer without the Assessing Officer first rejecting the books of account was not sustainable."
3. The brief facts of the case are that the assessee is a registered society under the Society Registration Act w.e.f. 01.04.1996. The benefit under Section 12-A of the Income Tax Act was extended to the assessee. However, during the assessment years under consideration, the A.O. noticed that the assessee has constructed a building, where the cost of the building was shown on the basis of report of the approved valuer. But the A.O. was not satisfied, so he referred the matter to the DVO who estimated the cost. The difference between the report of the two valuers comes to Rs.77,77,581/- and Rs.30,08,529/- respectively in the assessment year under consideration. So, the A.O. made the addition in each assessment year, but the said additions were deleted by the first appellate authority as well as by the Tribunal. Still not being satisfied, the Department has filed the instant appeals.
4. With this background, Sri D.D. Chopra, learned counsel for the Department submits that a reference under Section 142-A of the Income Tax Act was made to the DVO for estimating the cost of construction of building. The DVO vide report dated 09.03.2006 estimated the cost of construction. The difference of the amount was treated as unexplained investment. The appellate authorities have wrongly deleted the additions by observing that the provision of Section 40-A (3) do not apply as the assessee society is exempted under Section 11 of the Income Tax Act. He submits that the A.O. has denied the said benefit and made the additions on merit. Lastly, he made a request to restore the order of the A.O.
5. None appeared on behalf of the assessee.
6. After hearing learned counsel for the Department and on perusal of the record, it appears that the assessee society is the beneficiary of Sections 11 and 12 A of the Income Tax Act. In the instant case, on the basis of the approved valuer, the assessee has declared the investment of the building, but the A.O. was not satisfied. So, he has referred the matter to the DVO who again estimated the cost and made the additions.
7. Needless to mention that estimation is a question of fact as per the ratio laid down in the case of Commissioner of Customs (Import) v. Stoneman Marble Industries [2011] 2 SCC, 758.
8. The instant case, the CIT (A) has observed in its order that the A.O. has not specifically rejected the books of account and never pointed out any defects. The assessee submitted the books of account, vouchers, bills of building accounts which were duly examined by the A.O. with due application of mind and the same were never rejected. The reference to the DVO without rejecting the books of account is not desirable. The Tribunal is a final fact finding authority as per the ratio laid down in the case of Kamala Ganapathy Subramaniam v. Controller of Estate Duty [2002] 253 ITR 692/121 Taxman 615 (SC); and M. Janardhana Rao v. Jt. CIT [2005] 273 ITR 50/142 Taxman 722 (SC).
9. In view of above, we find no reason to interfere with the impugned order passed by the Tribunal and the same is hereby sustained along with the reasons mentioned therein.
9. The answer to the substantial question of law is in favour of the assessee and against the department.
10. In the result, both the appeals filed by the Department are hereby dismissed.
Regards
Prarthana Jalan
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