Income Tax Appellate Tribunal - Kolkata
Sanjay Kumar Saha, Kolkata vs Assessee on 29 August, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH "B", KOLKATA
[Before Hon'ble Sri Shamim Yahya, AM & Hon'ble Sri George Mathan, JM]
ITA No.720/Kol/2013
Assessment Year : 2005-06
(APPELLANT ) (RESPONDENT)
Shri Sanjay Kumar Saha `.-vs- I.T.O., Ward-55(1),
Kolkata Kolkata
(PAN:ALSPS 6822 M)
For the Appellant Shri K.M.Roy, FCA
For the Respondent Smt.Madhu Malati
Ghosh, JCIT,Sr.DR
Date of Hearing : 12.08.2014
Date of Pronouncement : 29.08.2014.
ORDER
Per Shri Shamim Yahya, AM
This appeal by the assessee is directed against order of ld. C.I.T.(A)- XXXVI, Kolkata dt. 28.01.2013 and pertains to Assessment year 2005-06.
2. Grounds of appeal raised by assessee read as under :-
"1. For that, in the facts and in the circumstances of the case the ld. CIT(A) erred in law in confirming the addition of the sum of Rs.15,46,700/- allegedly on account of Undisclosed investment on purchase of Flats, by solely relying on the report of the Departmental Valuer. The said amount invested by the Appellant was duly incorporated in the Books of Accounts maintained by the appellant and no material discrepancy in any manner whatsoever has been found by the ITO while making the assessment of the appellant.
2. For that having regards to the facts of the case the ld. CIT(A) was not justified in confirming the reopening of assessment u/s 147 of the Income tax Act, 1961 as there was no material on record that any part of the income of the Appellant has escaped assessment. The said addition of Rs.1,46,700/- made by the I.T.O. was merely on the basis of surmise and conjecture.
3. For that, on the facts, both the Authorities below erred both in points of law and on facts.
4. For that the Appellant craves leave to take further and/or additional grounds at the time or before hearing of this appeal petition if necessary."2 ITA.No.720/Kol/2013
Sri Sanjay Kumar Saha A.Yr.2005-06
3. From the above grounds we note that the issues raised are two fold. Firstly the assessee has pleaded that re-assessment was bad; secondly it has been urged that the addition on account of undisclosed investment amounting to Rs.15,46,700/- is not sustainable.
4. We shall deal with the first issue. The brief facts on this issue are that the assessee and his father purchased two flats from the promoter M/s.G.G.Developers one each on 3rd floor covering built up area 2595 sq.ft. in the name of the assessee and 4th floor having built up area of 1127 sq.ft in the name of assessee's father. The booking money of Rs.2 lakhs and Rs.2.50 lakhs for the aforesaid two flats were paid by the respective purchasers in the earlier assessment year, which were not disputed. According to the assessee, he had invested Rs.23,20,000/- during the assessment year under dispute for purchasing 3rd floor and also paid the sum of Rs.8,30,000/- being the balance price of his father's flat on 4th floor. Therefore, the total investment claimed to have been made by the assessee during the assessment year under dispute for the aforesaid two flats including car parking space and cost of land was Rs.31.50,000/-. The AO determined the total cost of acquisition of these two flats on the basis of report of the Departmental Valuation Cell at Rs.38,20,700/- (assessee's flat on 3rd floor) and Rs.11,26,800/- (father's flat on 4th floor), totaling to Rs.49,47,500/-. After deducting initial investments in earlier assessment year by the respective owners of the property, the AO found the difference in assessee's investment of Rs.15,46,700/- which is given in the following table :-
Property Investment as per Investment taken by Difference assessee's claim AO as per Valuation Cell 7A, Deshapriya Park Rs.23,20,000 Rs.38,20,700 Rs.15,00,700 West 3rd floor (deduction b/f Rs.2,00,000) 7A, Deshapriya Park Rs.10,80,000 Rs.11,26,800 Rs.46,000 West 4th floor a)Rs.8,30,000 by Rs.8,76,800 as assessee and assessee's investment
b)Rs.2,50,000 by his and balance father Rs.2,50,000 by his father) Total Rs.15,46,700 3 ITA.No.720/Kol/2013 Sri Sanjay Kumar Saha A.Yr.2005-06
5. Upon assessee's appeal the ld. CIT(A) considered the issue as under :-
"5.1. During the assessment proceedings, the appellant failed to submit any valuation report form a registered valuer. However, at the appellate stage, he filed such report for his 3rd floor flat from one registered valuer Sri Prabir Kr.Chaudhuru, according to whom the total value of land and flat at 3rd floor was Rs.24,505,724/-. The said report was sent to the AO, who in turn forwarded the same to the Departmental Valuation Cell for consideration. The Assistant Valuation Officer-IV (AVO-IV) in their report dated 20.12.2012 intimated that the valuation report filed by the appellant was not acceptable, because neither the valuation had been done by any department approved valuer nor it had been done in accordance with the Board's Instruction NO.1671 dated 06-12-1985. The relevant portion of the said report of AVO-IV is reproduced below :-
"1. The Valuation Report has been issued by this Office vide letter of even no.561 dated 27.12.2011, and been prepared as per CBDT Guidelines (copy enclosed0
2. Structural Drawings, extracts of quantity of building materials, bills and vouchers of materials and registered deed of assets has not been submitted by the assessee during the preparation of the report.
3. The Valuer who prepared the report on behalf of the assessee is not a paneled valuer of CBDT.
4. The valuer has not followed the guidelines of CBDT during the preparation of the Valuation. Hence the recommendation in the report cannot be accepted by this office."
5.2. Considering the above, I am of the considered view that the valuation report of the Departmental Valuation Cell is more authentic and acceptable. The AO on the basis of such report has determined the value of the impugned properties. In such circumstances, I find no plausible reason to differ from the AO's determination of value of the impugned properties and resultant undisclosed investment in such properties. The addition made on account in the sum of Rs.15,46,700/- is, therefore, upheld. Ground No.5 is dismissed."
Against the above order assessee is in appeal before us.
6. We have heard the rival contentions and carefully perused the records. Before proceeding further in this case we gainfully refer to the reasons for reopening recorded in this case which is as under :-
"Date : 18.11.2010 The assessee submitted his return for A.Y.2005-06 on 20/12/2005 disclosing a total income of Rs.3,16,659/-. The return was processed u/s 143(1).
From the balance sheet as on 31.3.2005, it was found that the 'a' had shown 'Advance against Flat' of Rs.33,50,000/-. For the purpose the 'a' availed a H.B.Loan from Bank of Baroda, Lake Market Branch. During the year, the assessee, had claimed deduction of Rs.1,39,038/- as per sec 24(b) of the I.T.Act, 1961. As per sec 24(b) of the I.T.Act'1961 deduction from income from house property is allowed. - "where the property has been acquired, constructed, repaired, renewed or reconstructed". Since the 'a' had only shown 'Advance against Flat', deduction u/s 24(b) of the I.T.Act, 1961 is not allowable.4 ITA.No.720/Kol/2013
Sri Sanjay Kumar Saha A.Yr.2005-06 During the year, the 'a' had received gift of Rs.2,00,000/- from his mother. From records it was found the 'a' is receiving gift from his mother almost every year. Genuineness of the gift and needs verification.
Moreover, from discrete enquiry, it was found that the assessee owns a flat of area 3000sq.flat on the 3rd floor and a flat of area 1500 sq.ft on the 4th floor. The assessee is showing investment of Rs.33,50,000/- on total area of 4500 sq.ft. which seems to be unreasonable and far below the fair market value.
In view of the above, I have reasons to believe that income chargeable to tax has escaped assessment. Hence proceedings u/s 147 of the I.T.Act, 1961 may be initiated."
6.1. We can also gainfully refer to provision of section 142A of the I.T.Act, 1961. which is as under :-
"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 section 69B or the value of any bullion, jewellery or other valuable article referred to in section 69A or section 69B 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.
2) The Valuation Officer to whom a reference is made under sub-section (1) shall, for the purpose of dealing with such reference, have all the powers that he has under
section 38A of the Wealth-tax Act, 1957 (27 of 1957).
(3) On receipt of the report from the Valuation Officer, the Assessing Officer may, after giving the assessee an opportunity of being heard, take into account such report in making such assessment or reassessment :
Provided that nothing contained in this section shall apply in respect of an assessment made on or before the 30th day of September, 2004, and where such assessment has become final and conclusive on or before that date, except in cases where a reassessment is required to be made in accordance with the provisions of section 153A."
6.2. Further we may also refer to the decision of the Hon'ble Gujarat High Court in the case of Goodluck Automobiles Pvt.Ltd. vs ACIT 359 ITR 306 where in connection with the above said section the Hon'ble Court has expounded as under :-
"On a conjoint reading of the provisions of section 69 and section 142A of the Income- tax Act, 1961, it appears that for the purpose of resorting to the provisions of section 142A of the Act, the Assessing Officer would first be required to record a satisfaction that the assessee has made investments which are not recorded in the books of account. As a necessary corollary, he would then reject the books of account as not reflecting the correct position and then proceed to make the assessment on the basis of estimation, for which purpose he can resort to the provisions of section 142A of the Act and make a reference to the Valuation Officer for estimating the value of such investment. Thus, on a plain reading of section 142A of the Act, it is apparent that the question of estimating the value of any investment would arise only when the books of account are not reliable. Accordingly, the Assessing Officer would first be required to reject the books of account before making a reference to the Valuation Officer. The rejection of books of account should precede the reference to the Valuation Officer. The report of the Valuation Officer cannot form the foundation for rejection of the books of account."5 ITA.No.720/Kol/2013
Sri Sanjay Kumar Saha A.Yr.2005-06 6.3. Further the Hon'ble Apex Court in the case of Sagam Cinema vs CIT 328 ITR 513 has held as under :-
"In the present case, we find that the Tribunal decided the matter rightly in favour of the assessee in as much as the Tribunal came to the conclusion that the assessing authority could not have referred the matter to the Departmental Valuation Officer (DVO) without the books of account being rejected. In the present case, a categorical finding is recorded by the Tribunal that the books were never rejected. This aspect has not been considered by the High Court. In the circumstances, reliance placed on the report of the DVO was misconceived.
For the above reasons, the impugned judgment of the High Court is set aside and the order passed by the Tribunal stands restored to the file. Accordingly, the assessee succeeds."
6.4. From the above we note that as mentioned in the reason for reopening there was no material whatsoever in the possession of the AO which suggests that assessee has invested unaccounted money in the purchase of flats. The reason mentions that it was from "discreet enquiry" . AO has found that assessee has owned the flats but the cost thereof seems to the AO as unreasonable. Thus there is no reason whatsoever in coming to this conclusion. Now it is mandated through section 142A of the Act that AO can refer to the valuation cell for an estimate of the value of the investment in connection with section 69,69A and 69B of the Act. However, this power of the AO cannot be applied indiscriminately without any reason. As held by the Hon'ble Gujarat High Court in the case of Goodluck Automobiles Pvt.Ltd vs ACIT (supra) for the purpose of resorting to the provision of section 142A of the Act the AO would first be required to record a satisfaction that the assessee has made investment which are not recorded in the books of account. It is only when the AO is satisfied that assessee had made unrecorded investment and AO has rejected the books that the AO can invoke to the provisions of section 142A of the Act and make a reference to the Valuation Officer for estimating the value of such investment. Similar view has also been expressed by the Hon'ble Apex Court in the case of Sangam Cinema (supra) 6.5. In the present case in the assessment order there is no mention whatsoever as to how the AO was of the opinion that the investment by the assessee in the flats needs a reference to the Valuation cell for valuation. The AO has found that the investment was made into the flat in the name of the assessee and assessee's father. AO has also 6 ITA.No.720/Kol/2013 Sri Sanjay Kumar Saha A.Yr.2005-06 given a finding that except for a small amount of booking father has not made further investment and the bulk of the investment was made by the son. AO has drawn adverse inference on the basis that father was not aware of the actual investment. When the investment has been done by the assessee and the same is reflected in the assessee's books it is not understood as to how the father has to give a categorical statement regarding the actual investment in the property. In this situation AO has referred the matter for valuation vide letters dated 13.12.2010 and 16.12.2010. The valuation cell's report was received on 21.12.2011 and 27.12.2011 respectively. Thus there is no satisfaction of the AO nor there is any basis to make reference to valuation cell. Thus we hold that there was no reason or basis for the AO to hold that he was satisfied that the investment in flats reflected by the assessee in his books was unreasonable as compared to fair market value and the AO has not rejected the books of account. In such situation the mandate emanating from the case laws referred above clearly provide that the AO cannot make a reference to the Valuation Officer u/s 142A of the Act. Accordingly we hold that reference to the Valuation cell was bad and AO cannot make addition in this case on the basis of the Valuation report obtained under such reference . Hence we set aside the orders of the authorities below and decide the issue in favour of the assessee.
6.6. Since we have already decided the issue on jurisdiction against the revenue we have not adjudicated the issue pertaining to the merits of the addition.
7. In the result the appeal of the assessee stands allowed.
Order pronounced in the court on 29.08.2014.
Sd/- Sd/- [ George Mathan ] [Shamim Yahya] Judicial Member Accountant Member Date: 29.08.2014. R.G.(.P.S.) 7 ITA.No.720/Kol/2013 Sri Sanjay Kumar Saha A.Yr.2005-06 Copy of the order forwarded to:
1. Shri Sanjay Kumar Saha, 7A, Deshapriya Park (West), 3rd Floor, Kolkata-
700026.
2 I.T.O., Ward-55(1), Kolkata.
3. CIT(A)-XXXVI, Kolkata 4. CIT Kolkata
5. CIT(DR), Kolkata Benches, Kolkata.
True Copy, By order, Asst. Registrar, ITAT, Kolkata Benches