Income Tax Appellate Tribunal - Lucknow
M/S Dr. Bhim Rao Ambedkar Educational ... vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
LUCKNOW BENCH "B", LUCKNOW
BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND
SHRI J SUDHAKAR REDDY, ACCOUNTANT MEMBER
ITA No.658/LKW/2011
Assessment Year:2008-09
ACIT v. M/s Dr. Bhim Rao Ambedkar
Range V, Lucknow Educational Society
Safedabad
Barabanki
PAN:AAAID0271G
(Appellant) (Respondent)
ITA Nos.468, 469, 396 & 397/LKW/2012
Assessment Years:2004-05, 2005-06, 2006-07 & 2007-08
ACIT v. M/s Dr. Bhim Rao Ambedkar
Range V, Lucknow Educational Society
Safedabad
Barabanki
PAN:AAAID0271G
(Appellant) (Respondent)
Appellant by: Shri. Jagdish, CIT (DR) & Smt. Ranu Biswas, D.R.
Respondent by: Shri. A. R. Shukla, Advocate
Date of hearing: 14.03.13
Date of pronouncement: 28/05/2013
ORDER
PER SUNIL KUMAR YADAV:
These appeals are preferred by the Revenue against the respective order of the ld. CIT(A). Since common issues are involved therein, these appeals were heard together and are being disposed of :-2-:
through this consolidated order. We, however, prefer to adjudicate them one after the other.ITA No. 658/LKW/2011 - A.Y. 2008-09:
2. This appeal is preferred against the order of the ld. CIT(A), inter alia, on various grounds, which are as under:-
1. The CIT(A) has failed to appreciate that the DVO has admittedly estimated the cost of construction of the building without reference to structural drawings and complete books of a/c and complete bills and vouchers. He has based his valuation only on the Regd. valuer's report submitted by the assessee. This method of valuation is incorrect and unacceptable. In these circumstances the value of building estimated by the AO and the addition on a/c of Investment construction from undisclosed sources to be restored.
2. The CIT(A) has failed to appreciate that the so called "anonymous donation" of Rs.75 Lakhs received during the year is nothing else but capitation fees received under another name, in the ease of Vodithala Education Society vs Addl. DIT (Exemption) II, Hyderabad 20 SOT 353 (Hyd.) it was held that if an assessee charged capitation fees, it was a case of sale of education by the assessee to earn profit and it could not be considered to be a charitable organization u/s 2(15) of the I.T. Act. Hence exemption u/s 11 is not available to the assessee.
3. The CIT(A) has failed to appreciate that since the assessee is not a charitable organisation as per section 2(15) of the I.T. Act exemption u/s 11 was not available to it, and the entire surplus of Rs.63,78,176 was taxable.
:-3-:
4. The CIT(A) has failed to appreciate that anonymous donations are separately taxable u/s 115 BBC read with section 13(7) of the I.T. Act 1961 and therefore the surplus of Rs.63,78,176 cannot be held to be included in the amount of anonymous donations and will have to be taxed separately.
5. Appellant crave leaves to add or amend any one or more of the grounds of appeals, as stated above, as and when need to doing so arises with the prior permission of the Court.
3. Apropos ground No.1, the facts in brief culled out from the orders of the lower authorities are that the assessee constructed a college building, in which investment from assessment year 2002-03 to 2010-11 amounting to `10,14,07,253 were made and in financial year relevant to the impugned assessment year, the cost of investment in construction shown by the assessee in the books of account amounts to `1,74,48,051. Being not convinced with the details of investment and the bills and vouchers produced before him, the Assessing Officer rejected the books of account by invoking the provisions of section 145(3) of the Income-tax Act, 1961 (hereinafter called in short "the Act") and made a reference under section 142A of the Act to the DVO for estimating the value of investment in construction, vide letter dated 29.11.2010. The DVO could not submit his report till the date of passing the assessment order. Therefore, the Assessing Officer has estimated the cost of construction on his own by applying the C.P.W.D. rates at `6,08,68,023 and after taking the cost of construction shown by the assessee, added the difference of `4,14,19,828 as unexplained investment under section 69B of the Act.
4. The assessee preferred an appeal before the ld. CIT(A) challenging the cost of construction estimated by the Assessing Officer on the ground that while estimating the cost of construction, the Assessing :-4-:
Officer has ignored the approved Valuer's report and the U.P.P.W.D. rates. During the course of appellate proceedings, the DVO's report as called for by the Assessing Officer under section 142A of the Act has been received and copy of the same was provided by the Assessing Officer to the ld. CIT(A). As per DVO's report dated 8.3.2011, the cost of construction in various financial years vis-à-vis the investment declared by the assessee in its books of account upto February, 2011 is extracted hereunder:-
Financi Declared Estimated cost of
al Year Investment (In construction (In Rs)
Rs.)
2002-03 52,04,088 55,70,700
2003-04 39,49,078 42,27,250
2004-05 88,58,225 41,30,000
2005-06 92,62,880 99,15,350
2006-07 1,34,12,860 1,43,57,700
2007-08 1,74,48,051 1,86,77,100
2008-09 2,76,61,171 2,96,09,650
2009-10 1,60,65,050 1,71,96,700
2010-11 45,45,080 48,66,050
Total 10,14,07,253 10,85,50,500/-
5. A copy of the DVO's report was supplied to the assessee for his comments and in response thereto it was contended on behalf of the assessee that difference in investment as shown by the assessee in its books of account and investment in construction estimated by the DVO was :-5-:
`12,29,049 which is 6.58% of the cost of construction shown in this year and the difference in the investments made and estimated by the DVO in various financial years are taken together into consideration, the final difference comes to `71,43,247 which is again 6.58% of the total investment. It was further stated on behalf of the assessee that the assessee has already made a surrender of a sum of `65 lakhs towards the cost of investment for construction of the building over and above shown in the books of account and if the said amount is taken into account, the difference would be very nominal, for which no addition is called for. The comments of the assessee on the DVO's report were also confronted to the Assessing Officer for his comments. Having taken into account the comments and counter-comments, the ld. CIT(A) has examined the issue and since the difference between the investment in construction declared by the assessee and estimated by the DVO is very nominal after taking into account the surrender made by the assessee, the ld. CIT(A) deleted the addition. The relevant observations of the ld. CIT(A) are extracted hereunder for the sake of reference:-
"6.6.1 I have examined the facts and circumstances of the case. I have perused the findings of the AO in the assessment order, submissions made by the appellant, the comments made by the AO in the remand report and the submissions of the appellant thereon. I have also considered the submissions made by the AO before me. So far as the appellant's objection about the rejection of books of accounts and invoking the provisions of section 145(3) of the Act is concerned, the Assessing Officer has mentioned in the assessment order that all the vouchers relating to major expenditure and muster roll of the labours were not produced. In such a situation the Assessing Officer could not examine the cost of investment :-6-:
recorded in the books of account and was left with no other alternative but to make a reference under section 142A of the Act to the DVO requiring the DVO to elucidate the cost of investment.
6.6.2 The provisions of section 142A of the Act are- Estimate by Valuation Officer in certain cases 142A. (1) for the purpose of making an assessment or reassessment under this Act, where an estimate of the value of any investment referred to in section 69 or 69B or the value of any bullion,.............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.
The aforesaid provisions of section 142A of the Act enable the Assessing Officer to require a Valuation Officer to estimate the value of any investment referred to in section 69 of the Act or as the case may be, section 69B of the Act. Since the required books of accounts not produced the AO rightly came to the conclusion and has correctly recorded his finding on his non- satisfaction of correctness and completeness of the books of accounts under section 143(3) of the Act in so far as the investment in cost of construction of college building is concerned. The AO has therefore rightly rejected the books of accounts under section 145(3) of the Act and is justified in making the reference to the D.V.O. under section 142A of the Act. The contention of the appellant that specific defects were not pointed out while rejecting the books of accounts carries :-7-:
no force. The ground of appeal number 2.3 fails and is rejected.
6.7.1 As regards the addition of Rs.4,14,19,828/- made by the AO is concerned, I find that the addition for the difference in the cost of construction was made by the AO on the basis of his own valuation rather than the addition being made on the basis of the difference worked out on the basis of report of the DVO requisitioned under section 142A of the Act. The addition made by the AO was necessitated as the report of the DVO requisitioned under section 142A of the Act was not received till the date of passing of the assessment order under section 143(3) of the Act. The report of the DVO received subsequently has estimated the cost of construction of college building at Rs.10,85,50,500/- as against Rs.10,14,07,253/-
shown by the appellant in its books of accounts. The difference in the two figures works out to 6.58%. Even if the estimate of the cost of construction in the financial year 2007-2008 relevant to impugned assessment year 2008-2009 is considered then also the difference works out to about 6.5%. The cost of construction recorded by the assessee in its books of accounts is Rs.1,74,48,051/- and the cost of construction estimated by the DVO is Rs.1,86,77,100/-. It is also worth mentioning that the total difference worked out on the basis of the report of the DVO from the financial year 2002-2003 to financial year 2010-2011 is Rs.71,43,247/-. During the course of survey under section 133A of the Act, the appellant made an offer for taxation of additional amount of Rs.75,00,000/- for the impugned assessment year. Out of the said disclosure of :-8-:
additional amount, a sum of Rs.65,00,000/- was specifically made towards the cost of construction of college building. This additional amount has been offered as anonymous donations and tax has been paid under section 115BBC of the Act. It means that the unexplained investment under section 69B of the Act after the said disclosure of additional amount on which tax has been paid under section 115BBC of the Act would be Rs. 6,43,247/- (Rs.71,43,247/- less Rs. 65,00,000/-). This difference is negligible as compared to total construction shown.
6.7.2 The Hon'ble ITAT, Lucknow Bench in the case of Dy. CIT V. Janki Prasad Garden Enclave (P) Ltd. in ITA No. 54/AII/1999 had decided vide order dated 28-2-2003 that, if difference is less than 10% in valuation made by the valuation expert and amount of investment shown by the assessee, then such difference is to be ignored. Similar proposition has been reiterated in ITO Vs Smt. Pramila Agarwal: (2004) 88 TTJ Luck
913. Similar findings were confirmed by Hon'ble MP High Court in the case of CIT Vs. Abesson Hotels (P) Ltd. (2004)191 CTR (MP) 263 when it was laid down that a difference of 10% is not unusual and unreasonable. In view of the discussion above, I do not find any justification in the addition of Rs.4,14,19,828/-
made by the AO on the basis of his own estimation rather than on the estimation of the DVO. Even if the difference worked out by the DVO is considered then also the difference in less than 10% which is to be ignored in view of the decisions cited supra. The addition of Rs.4,14,19,829/- made by the Assessing Officer under section 69B of the Act is directed to be deleted.
:-9-:
The appellant gets consequential relief of Rs. 4,14,19,828/-. The grounds of appeal are allowed."
6. During the course of hearing of the appeal, the ld. CIT (DR) has placed heavy reliance upon the assessment order. However, no specific defect in the order of the ld. CIT(A) has been pointed out by him.
7. The ld. counsel for the assessee, on the other hand, has contended that since the ld. CIT(A) has examined the issue in the light of the DVO's report and the assessee's contention, no interference is called for in the order of the ld. CIT(A).
8. Having given a thoughtful consideration to the rival submissions and from a careful perusal of the orders of the lower authorities, we find that undisputedly the DVO's report was not submitted to the Assessing Officer by the DVO before the end of the assessment proceedings and he estimated the cost of construction on his own having applied the C.P.W.D. rates. The DVO's report was admittedly received during the pendency of the appeal before the ld. CIT(A) and the ld. CIT(A) has taken cognizance of the same. The comments of the parties were also sought by the ld. CIT(A) and examined the issue in the light of the DVO's report and comments of the parties. It is also undisputed fact that during the course of survey the assessee himself has offered a sum of `65 lakhs as investment in construction and if the credit of the same is given, the difference in investment in construction declared by the assessee and estimated by the DVO will be nominal, for which addition cannot be called for. It has been repeatedly held through various judicial pronouncements by different High Courts and various Benches of the Tribunal that if the difference in the cost of investment in construction declared and estimated by the DVO is less than 10%, the same should be ignored. In the instant case even without giving credit of the surrendered amount, the difference between the cost of :-10-:
construction estimated by the DVO and investment in construction declared by the assessee is 6.58%, which is less than 10% of the total investment in construction declared by the assessee and according to the judicial pronouncements this difference is to be ignored, but once credit of the surrendered amount of `65 lakhs is given, the difference will be very nominal. Therefore, in the light of these facts, we are of the view that the ld. CIT(A) has properly adjudicated the issue and no interference is called for in his order. Accordingly, we confirm his order.
9. Apropos ground No.2, it is noticed that an amount of `75 lakhs was shown as anonymous receipt in the form of donation, out of which `65 lakhs have been applied in construction of college building and as far as the amount of `10 lakhs is concerned, it is shown as advance to staff and cash in hand. These amounts are included in the total income of the assessee by virtue of provisions of section 13(7) of the Act and are to be taxed at special rate provided in section 115BBC of the Act. The ld. CIT(A) has observed that once computation of income is made under section 11 of the Act, the utilization towards charitable activities has to be to the extent of 85% of the receipt. The anonymous donation taxed under section 115BBC of the Act by virtue of they being included in total income of the assessee under section 13(7) of the Act are to be considered for the purpose of utilization for charitable activities as per section 11(1)(a) of the Act. It is also undisputed fact that the assessee is registered under section 12A of the Act and once the assessee has been recognized as a charitable institution under section 12A of the Act, its income has to be computed as per sections 11 to 13 of the Act and there is no dispute that the assessee has utilized its funds for construction of the building in order to achieve its object for imparting education. The Assessing Officer has nowhere alleged that the said college building was used for the purpose other than educational activities. The assessee himself has admitted receipt of `75 :-11-:
lakhs as anonymous donation and the prescribed rate of tax under section 115BBC of the Act has been paid. Therefore, the entire amount cannot be treated as capitation fee for denying benefit of exemption under section 11 of the Act. The ld. CIT(A) has properly examined this aspect before allowing the claim of the assessee that it is a charitable institution and it has already paid prescribed rate of tax as per law. Since no specific defect in the order of the ld. CIT(A) has been pointed out during the course of hearing of the appeal, we find no infirmity therein. Accordingly, we confirm the same.
10. Apropos grounds No.3 and 4, it is noticed that the Assessing Officer has brought surplus of `63,78,176 as per income and expenditure account to tax without realizing that surplus claimed is below 15% of the total receipt. While doing so the Assessing Officer has observed that the above expenditure which has been established is mainly due to profit making activity and the dominant object of the alleged trust is not charitable in nature but profit making. Therefore exemption under section 11 of the Act is denied and he accordingly made addition of `63,68,176.
11. In appeal, the ld. CIT(A) examined this issue in the light of the assessee's contention and was of the view that once registration is granted under section 12AA of the Act by the CIT, the income has to be computed in accordance with the provisions of section 11 of the Act. The reasons to deny exemption under section 11 of the Act given by the Assessing Officer are that the expenditure incurred in construction of college building is a profit making activity and is not charitable in nature. Relying upon various judicial pronouncements, the ld. CIT(A) has held that the sole object of the assessee-trust was to manage and maintain medical college which is an educational institution without any motive of private or personal profit. He further observed that merely because certain surplus arose from its :-12-:
operation, it cannot be held that the institution is being run for the purpose of profit so long as no person or individual is entitled to any portion of the said profit and the said profit is used for the purpose and for the promotion of the objects of the institution. The relevant observations of the ld. CIT(A) are extracted hereunder for the sake of reference:-
"10.4.1 I have examined the facts and circumstances of the case.
I have perused the findings of the AO in the assessment order and submissions made by the appellant. It is well settled law that once the appellant has been granted registration under section 12AA of the Act by the Commissioner of Income Tax, the income has to be computed in accordance with the provisions of section 11 of the Act. The reason to deny the exemption under section 11 of the Act given by the Assessing Officer that the expenditure incurred in the construction of college building is a profit making activity and is not charitable in nature is not justified as the profit making is not a criteria for denial of exemption any more under section 11 of the Act. It has been held by the Andhra Pradesh High Court in the case of Governing Body of Rangaraya Medical College v. ITO [1979] 117 ITR 284, 287 that where no finding was recorded that any surplus arising from the operations of the Institution was distributed by way of profit to any individuals, the assessee-trust, the sole object of which was managing and maintaining the medical college, was an educational institution without any motive of private or personal profit. It was also observed that ".....Merely because certain surplus arises from its operations, it cannot be held that the institution is being run for the purpose of profit so long as no person or individual is entitled to any portion of the said profit and the said profit is used for the :-13-:
purposes and for the promotion of the objects of the institution....."
10.4.2 In the impugned case, the expenditure has been incurred for the educational activities for which the appellant has been granted registration under section 12A of the Act. The expenditure incurred by the appellant in pursuance of its objects has to be treated as application of income towards its objects.
The surplus cannot be taxed and exemption under section 11 of the Act cannot be denied, unless there is a violation of section 13 of the Act or any of the conditions mentioned in section 11(2) of the Act are not fulfilled. In the Impugned case there is no finding of the AO of any such of violation of section 13 of the Act or any finding in the assessment order that the conditions mentioned in section 11(2) of the Act have not been fulfilled. The appellant is therefore eligible to exemption under section 11 of the Act. Hon'ble Gujarat High Court in the case of Ahemdabad Urban Development Authority Vs. Dy. Director of Income-tax (Exemption) 335 ITR 575 has laid down as under:-
"Section 12AA of the Act lays down the procedure for registration in relation to the conditions for applicability of sections 11 & 12 as provided in section 12A of the Act, Therefore, once the procedure is complete as provided in sub-section (1) of section 12AA of the Act and a Certificate is issued granting registration to the Trust or Institution it is apparent that the same is a document evidencing satisfaction about: (1) genuineness of the activities of the Trust or institution, (2) about the objects of the Trust or Institution. Section 12A of the Act stipulates that provisions of sections 11 &
12 shall not apply in relation to income of a Trust or an Institution :-14-:
unless conditions stipulated therein are fulfilled. Thus granting of registration under section 12AA of the Act denotes, as per legislative scheme, that conditions laid down in section 12A of the Act stand fulfilled. The effect of such a Certificate of Registration under section 12AA of the Act, therefore, cannot be ignored or wished away by the Assessing Officer by adopting a stand that the Trust or Institution is not fulfilling conditions for applicability of sections 11 & 12 of the Act."
10.4.3 The excess of income over expenditure as computed by the Assessing officer in the assessment order is Rs.63,68,176/- which is about 11% of the total receipts. The said surplus computed by the AO is below the statutory limit of 15%. There is no justifiable finding in the assessment order which leads to denial of exemption under section 11 of the Act. On the contrary in view of the decisions cited supra, the appellant is eligible for exemption under section 11 of the Act on the strength of registration granted to it under section 12A of the Act. Therefore, the appellant has to be treated as exempt in view of section 11(1)(a) of the Act. The AO is directed to recompute the income under section 11 of the Act. As an abundant precaution, it is imperative to mention here that the amount of Rs.75,00,000/- offered by the appellant as additional amount for taxation is included in total income of the appellant under section 13(7) of the Act and taxed at prescribed rate under section 115BBC of the Act. However, this amount is to be considered for the purpose of section 11(1)(a) of the Act and the surplus, if any, has to be separately computed in accordance with the provisions of section 11(1)(a) of the Act as exemption is :-15-:
available to the appellant by virtue of registration granted to it under section 12A of the Act. The grounds of appeal are allowed."
12. The ld. CIT (DR) except raising a general argument has not pointed out any specific instance to establish that the assessee-institution is being run for the purpose of profit.
13. The ld. counsel for the assessee, besides placing heavy reliance upon the order of the ld. CIT(A), has contended that for denying benefit of exemption under section 11 of the Act, onus is upon the Revenue to establish that the assessee-society is engaged in profit making activity and not in charitable activity. The assessee has placed enormous evidence to support that the sole object of the assessee-society is to impart education and more than 85% of the receipts received in this year was used in construction of college building. Therefore, benefit of exemption under section 11 of the Act cannot be denied.
14. Having given a thoughtful consideration to the rival submissions and from a careful perusal of the orders of the lower authorities, we find that undisputedly the society is registered under section 12AA of the Act and has been enjoying the benefit of exemption under section 11 of the Act in past years. During the course of survey, it has been admitted by the assessee that it received anonymous donation of `75 lakhs, out of which `65 lakhs was used in construction of the college building. Besides, other receipts were also used for construction of the building. Therefore, more than 80% of the receipts were utilized for construction of building and nothing is placed on record by the Revenue that the assessee was ever engaged in profit making activities. Since the assessee is engaged in educational activities, denial of exemption under section 11 of the Act is not :-16-:
justified. The ld. CIT(A) has properly examined this issue and since we do not find any infirmity therein, we confirm his order on this issue.
ITA Nos.468, 469, 396 & 397/LKW/2012 - A.Ys: 2004-05, 2005- 06, 2006-07 & 2007-08
15. In these appeals, the Revenue has assailed the orders of the ld.
CIT(A) on various common grounds except the quantum of additions made in different assessment years. The main ground in all these appeals relates to the validity of reopening of assessment under section 147 of the Act. Since the issue relating to this ground goes to the root of the case, we are of the view that it should be adjudicated at threshold.
16. The facts in this regard borne out from the record are that the Assessing Officer has reopened the assessment by invoking the provisions of section 147 of the Act having relied upon the DVO's report, against which appeal was filed before the ld. CIT(A) with the preliminary objection that provisions of section 147 of the Act empowers the Assessing Officer to reopen the assessment if he has reason to believe that any income chargeable to tax has escaped assessment. The process of formation of belief has to be independent application of mind by the Assessing Officer. Where an assessment has been completed, the reopening of assessment solely on the basis of a report of DVO will amount to change of opinion and will be based on the application of mind by the DVO rather than the Assessing Officer as envisaged in the provisions of section 147 of the Act. The ld. CIT(A) examined this issue in the light of various judicial pronouncements and finally came to the conclusion that the reasons recorded by the Assessing Officer being final for reopening of assessment as held by various Courts, the notice issued under section 148 of the Act is invalid. Therefore, the Assessing Officer is not justified in completing the assessment on the basis of insufficient reasons recorded for the purpose of reopening of assessment under section 147 of the Act. He accordingly :-17-:
annulled the assessment framed on the basis of reasons recorded relying upon the DVO's report. The relevant observations of the ld. CIT(A) are extracted hereunder for the sake of reference:-
"6(6)(i) I now proceed to examine the judicial pronouncements on this issue of reopening of Assessment on the sole basis of report of Valuation Officer. Under the similar sets of facts and circumstances, the Hon'ble Lucknow Bench of ITAT in I.T.A. No. 259 & 260/Lucknow/2010 in the case of Income Tax Officer-III, Faizabad Vs. Shree Ram Verma, held that where the report of the D.V.O. was the only basis for issuing the notice under section 148 of the Act, the reassessment was not valid. Similarly the Hon'ble Punjab & Haryana High Court in the case of C.I.T. Vs. Suresh Kumar 275 I.T.R. 253 (P & H) has held as under :-
"That a reading of the reassessment order passed by the Assessing Officer showed that he had issued show cause notice to the assessee under section 147 of the Act solely on the basis of the departmental valuer's report. The proceedings were initiated because the Assessing Officer changed his opinion on the issue of Valuation of the construction. The Reassessment proceedings were not valid."
6(6)(ii) A similar view has been taken by Hon'ble Madras High Court in the case of C.I.T. Vs. V.T. Rajendran 288 ITR 312 wherein it has been held that -
"the report of the Departmental Valuation Officer could not be the basis for reassessment because the valuation cannot be an arithmetical appreciation of the materials used for the construction or the expenses incurred by the Assessee in that :-18-:
regard. The Tribunal was right and the reassessment was not valid."
6(6)(iii) Further in the case of C.I.T. Vs. K. Rajapandian [2009] 311 ITR 477 (Madras) it was observed that:
"In case of a construction of a building by the assessee for a reassessment to be made, the report of the Departmental Valuation Officer cannot be a basis because the Valuation cannot be an arithmetical appreciation of the materials used for the construction nor the expenses incurred by the assessee in that regard, as variations are bound to be there."
6(6)(iv) On a similar issue the Hon'ble Jurisdictional High Court in the case of Fusion Electronics Pvt. Ltd. Vs. Income Tax Department in writ petition No. 11055 (MB) of 2009 order dated 01.12.2009, observed as under:-
"From the record, it appears that the assessee has constructed a factory which was completed within three years. On the basis of the D.V.O.'s Report, which was sought during the previous assessment year, the Assessing Officer has made the addition in the earlier assessment year but the same were deleted by the C.I.T.(A). However, during the assessment year under consideration, impugned notice for reopening the assessment was issued along with the reasons which were solely based on the D.V.O.'s Report.
In the light of above settled legal position, we set aside the impugned notice issued by the Department under section :-19-:
148 of the I. T. Act as the same was issued solely based on the D.V.O.'s Report.
In the result, the writ petition is allowed. No order to costs."
6(6)(v) Finally, Hon'ble Supreme Court in its order dated 16th February, 2010 in Civil Appeal No. 9468/2003 (reported as Assistant Commissioner of Income Tax Vs. Dhariya Construction Co. (2010), 236 CTR (SC) 226 : (2010) 47 DTR (SC) 288- ED., 328 I.T.R. 515] has held as under -
'Having examined the record, we find that in this case, the Department sought reopening of the assessment based on the opinion given by the District Valuation Officer (DVO). Opinion of the DVO per se is not an information for the purposes of reopening assessment under section 147 of the I. T. Act, 1961. The A. O. has to apply his mind to the information, if any, collect and must form a belief thereon. In the circumstances, there is no merit in the civil appeal.
The Department was not entitled to reopen the assessment. 6(6)(vi) Various Benches of Hon'ble Income Tax
Appellate Tribunal, Hon'ble High Courts as well as Hon'ble Supreme Court are unanimous in their opinion that the Assessing Officer is not justified in reopening the assessment proceedings solely on the basis of the opinion of the DVO of higher valuation than that disclosed by the appellant. In other words the valuation report of the DVO cannot be the sole reason for :-20-:
reopening the assessment for the purpose of section 147 of the Act.
6(7) In the instant case, the reasons recorded by the AO show that there were no reasons available with the AO except a report of Valuation Officer which showed a valuation higher than that disclosed by the appellant. According to the judicial pronouncements outlined by me, I do not find that the reasons are valid for reopening of the assessment as these are based solely on report of DVO. The reasons recorded by the Assessing Officer being insufficient for reopening of assessment as held by various courts, the notice issued under section 148 of the Act is invalid. The AO is therefore not justified in completing assessments on the basis of insufficient reasons recorded for the purpose of reopening of assessments under section 147 of the Act. I therefore annul the assessments framed in the present case on the basis of reasons recorded, which are based solely on the report of the DVO. The ground of appeal related to the aforesaid issue is allowed."
17. Now the Revenue has preferred appeals before the Tribunal with the submission that the Assessing Officer has recorded reasons before reopening the assessment under section 147 of the Act. Since the Assessing Officer has sufficient material to form a belief that the income chargeable to tax has escaped assessment, the action of the Assessing Officer to reopen the assessment under section 147 of the Act cannot be questioned.
18. Having heard the rival submissions and from a careful perusal of record, we find that undisputedly reopening of assessment was done by :-21-:
invoking the provisions of section 147 of the Act after recording reasons on the basis of the DVO's report. Since the reasons were recorded on the basis of the DVO's report and the Assessing Officer has not formed his own belief that the income chargeable to tax has escaped assessment, the reopening is not valid in the light of various judicial pronouncements referred to by the ld. CIT(A) in his order. The ld. CIT(A) has examined this issue in the light of various judicial pronouncements in the right perspective and since we do not find any infirmity therein, we confirm his order. Since the assessment is annulled, we find no justification to adjudicate the appeals on merit.
19. In the result, all the appeals of the Revenue are dismissed.
Order pronounced in the open court on 28/05/2013 Sd/. Sd/.
[J SUDHAKAR REDDY] [SUNIL KUMAR YADAV]
ACCOUNTANT MEMBER JUDICIAL MEMBER
DATED:28/05/2013
JJ:1604
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT(A)
4. CIT
5. DR
Assistant Registrar