Income Tax Appellate Tribunal - Jabalpur
Smt. Kamlesh Kumari Sharma vs Income-Tax Officer on 26 February, 1998
Equivalent citations: [1998]67ITD29(JAB)
ORDER
Agrawal, A.M.
1. This appeal by the assessee is directed against the order of CIT(A), Jabalpur.
2. Though in the grounds of appeal as many as seven grounds are raised, they are all against the addition of Rs. 1,04,267 sustained by the CIT(A) on account of unexplained investment in the construction of house.
3. The facts of the case are that during the year under consideration, the assessee constructed a residential house. The cost of construction was shown at Rs. 55,983. For the year under consideration, the return of income was filed on 24th June, 1988, disclosing income of Rs. 18,200. The assessment was completed under section 143(1) on 19th September, 1989. The Assessing Officer issued commission under section 131(1)(d) to the Departmental Valuation Officer on 4-6-1990 for determination of the cost of construction of the building. The Departmental Valuation Officer estimated the cost of construction at Rs. 2,25,000. During the course of assessment proceedings, it was explained by the assessee that the D.V.O. had included some portions of the building, which was constructed later on i.e. during the accounting period relevant to assessment year 1990-91. It was also explained that the building was constructed after dismantling the old kachcha house. It was claimed that the brick and wood etc. of the old house was utilised in the construction of new building. The set-off of the user of old material was claimed by the assessee. The assessee had also submitted a valuation report from an approved valuer in which he had worked out the cost of construction at Rs. 1,22,300. The Assessing Officer made an addition of Rs. 1,14,267 on the basis of working as below :
Cost of construction as determined by the D.V.O. Rs. 2,25,000
Less : Cost of construction for work done during
assessment year 1990-91 Rs. 44,750
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Rs. 1,80,250
Less : Set-off for the use of old material Rs. 10,000
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Net cost of construction Rs. 1,70,250
Less : Investment shown by the assessee Rs. 55,983
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Unexplained investment Rs. 1,14,267
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On appeal, the CIT(A) upheld the entire working by the Assessing Officer except she allowed a sum of Rs. 20,000 for the use of old material as against Rs. 10,000 allowed by the Assessing Officer. Thus, the resultant addition was Rs. 1,04,267. The assessee aggrieved with the addition sustained by the CIT(A) is in appeal before us.
4. At the time of hearing before us, the ld. counsel for the assessee argued at length. His arguments may be summarised as under :-
(a) That the Assessing Officer has no power under section 131 to issue commission to D.V.O. to ascertain cost of construction of property.
(b) That the issue of commission to the D.V.O. on 4-6-1990 was not in accordance with law, because no assessment proceedings were pending on 4-6-1990. He pointed out that the assessment was already completed under section 143(1) on 19-9-1989. After the completion of assessment under section 143(1), no assessment proceedings was pending before the Assessing Officer until the issuance of notice under section 143(2). Notice under section 143(2) was issued only on 19-2-1991. Therefore, the commission issued on 4-6-1990 cannot be said to be a commission for the purpose of assessment proceedings, but it could at the most, be for the purpose of making inquiry. He, therefore, submitted that the commission issued on 4-6-1990 was illegal and not in accordance with law. Therefore, the valuation report issued by the D.V.O. in consequence to the Commission dated 4-6-1990 be quashed. In support of this contention, he relied upon the following decisions :-
(1) Jamnadas Madhavji & Co. v. J. B. Panchal, ITO [1986] 162 ITR 331/27 Taxman 157 (Bom.) and (2) Bholanath Majumdar v. ITO [1996] 221 ITR 608 (Gau.).
(c) That the valuation report by the D.V.O. is factually incorrect as he determined the value at a very excessive figures ignoring the facts of the case. The D.V.O. had applied a lump sum plinth area rate without giving any basis therefore. He, therefore, submitted that the report of the D.V.O. be rejected and that of approved valuer be adopted.
(d) That the rebate for the use of old material allowed at Rs. 20,000 by the CIT(A) is grossly inadequate as the assessee had lot of old material in the form of wood and bricks etc., which was utilised in the new house. He, therefore, submitted that a rebate of Rs. 60,000 be allowed as against Rs. 20,000 allowed by the CIT(A).
5. The ld. DR relied upon the assessment order as well as the order of the CIT(A). He submitted that the Assessing Officer has all powers to issue commission to D.V.O. under section 131(1)(d) of the Income-tax Act, 1961, and the commission had been validly issued. The Assessing Officer has rightly considered the report of the Departmental Valuation Officer and has excluded therefrom the cost of construction carried on by the assessee during assessment year 1990-91. The Assessing Officer has also allowed rebate for the user of old material. Therefore, he submitted that the assessment order is quite fair and reasonable. The same should be upheld.
6. We have considered the arguments of both the sides and have perused the records placed before us. Section 131(1) of the Income-tax Act, 1961, as it stood at the relevant time, reads as under :
"131(1) The (Assessing) Officer, (Dy. Commissioner (Appeals)), (Dy. Commissioner), (Commissioner (Appeals)) and (Chief Commissioner or Commissioner) shall, for the purposes of this Act, have the same powers as are vested in a Court under the Code of Civil Procedure, 1908 (5 of 1908), when trying a suit in respect of the following matters, namely :-
(a) discovery and inspection;
(b) enforcing the attendance of any person, including any officer of a banking company and examining him on oath;
(c) compelling the production of books of account and other documents; and
(d) issuing commissions."
Thus, the above sub-section gives powers to the Assessing Officers which are available to the Court under the Code of Civil Procedure while trying a suit. Section 75 of the Civil Procedure Code empowers the Court to issue commission, which reads as under :-
"75. Subject to such conditions and limitations as may be prescribed, the Court may issue a commission -
(a) to examine any person;
(b) to make a local investigation;
(c) to examine or adjust accounts;
(d) to make a partition;
(e) to hold a scientific, technical, or expert investigation;
(f) to conduct sale of property which is subject to speedy and natural decay and which is in the custody of the Court pending the determination of the suit;
(g) to perform any ministerial act."
From the above, it is clear that clause (e) of section 75 authorises the Court to issue commission for a scientific, technical or expert investigation. The commission issued by the Assessing Officer for determining the cost of construction, would certainly come within the ambit of technical/expert investigation. We, therefore, hold that under section 131(1)(d), the Assessing Officer is empowered to issue commission to D.V.O. for determination of cost of construction.
It was contended by the ld. counsel for the assessee that the commission could have been issued only during the course of continuation of assessment proceedings. Section 131(1) gives the powers to the Assessing Officer, which are vested in a Court "when trying a suit". The words "when trying a suit" are in continuous tense. It means, the trial of the suit is in progress. Thus, when the similar power is being utilized by the Assessing Officer, it must be during the continuation of the assessment proceedings and neither before the start of the assessment proceedings nor after the completion of the assessment proceedings.
In the case under appeal before us, the return was filed on 24th June, 1988. Assessment was completed under section 143(1) on 19-9-1989. Commission under section 131(1)(d) to the D.V.O. was issued on 4-6-1990. Notice under section 143(2) for assessment proceedings was issued on 19-2-1991. As per the law relevant to assessment year 1988-89, which is under appeal before us, after the completion of assessment under section 143(1), no assessment proceedings can be said to be pending. The assessment proceedings was re-initiated only after issuance of notice under section 143(2). Thus, in our opinion, no assessment proceedings was pending in continuation on the date when commission under section 131(1)(d) was issued. Accordingly, we hold that the issue of commission under section 131(1)(d) for determination of cost of construction was not in accordance with law. While taking this view, we also derive support from the decision of Hon'ble Bombay High Court in the case of Jamnadas Madhavji & Co. (supra), wherein their Lordships have held as under :
"(i) that no proceeding was pending when the Income-tax Officer issued the impugned summons and, therefore, the summons was liable to be quashed;
(ii) that the reason for issuing the summons as stated by the Income-tax Officer in his letter of October 30, 1980, was to investigate whether the assessment for the assessment years 1972-73 to 1974-75 should be reopened under section 147. It was for the ITO to first decide whether he had reason to believe that income had escaped assessment. Only if he decided that question in the affirmative, could he initiate proceedings under section 147 and only thereupon could he become entitled to invoke section 131(1). Therefore, the impugned summons was liable to be quashed."
7. In view of the above, we hold that the DVO's report cannot be utilized against the assessee. However, the assessee himself has submitted a report from the approved valuer, who estimated the cost of construction at Rs. 1,22,300 in respect of the construction carried on by the assessee during the year under consideration. The ld. counsel for the assessee could not put forward any plausible explanation for difference between the value estimated by approved valuer and the cost of construction shown by the assessee. He only claimed that the rebate for the user of old material allowed is very less. We find that the approved valuer has estimated the cost of construction at Rs. 1,22,300. The rebate for use of old material allowed by CIT(A) is Rs. 20,000, which is approximate 1/6th of the cost of construction. In our opinion, the estimate made by the CIT(A) at Rs. 20,000 is quite fair. We accordingly work out the addition for unexplained investment as under :-
Rs.
Cost of construction worked out by the approved valuer 1,22,300
Less : Rebate for use of old material 20,000
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1,02,300
Less : Net cost of construction shown by the assessee 55,983
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Unexplained investment 46,317
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Accordingly, we uphold the addition for unexplained investment in respect of construction of the building at Rs. 46,317 as against Rs. 1,04,267 upheld by the CIT(A).
8. In the result, the assessee's appeal is partly allowed.