Income Tax Appellate Tribunal - Lucknow
Dy. Cit vs Rohtas Projects Limited on 9 August, 2005
Equivalent citations: [2006]282ITR42(LUCK)
ORDER
B.R. Mittal, Judicial Member
1. There was a difference of opinion between the Members of the Bench and the following question was referred to the Third Member for his opinion :
Whether on the facts and in the circumstances of the case, the ld. Judicial Member is justified in deleting the addition made by the Assessing Officer in the construction of the flats on the basis of the DVO's report on the basis of the decision of the Apex Court in the case of Smt. Amiya Bala Paul v. CIT 262 ITR 407, or the ld. Accountant Member is justified to restore the matter back to the file of the A.O. to de novo examine the Investment in the cost of construction.
2. The Hon'ble Vice President, Shri Phool Singh sitting as Third Member, by his opinion dated 6th July, 2005, has concurred with the view of the ld. Judicial Member, who has deleted the addition made by the Assessing Officer in the construction of the flats on the basis of the DVO's report.
3. Therefore, in accordance with the majority view, the issue stands decided in favour of the assessee. Accordingly, the appeal filed by the Department is dismissed.
The Department has filed this appeal for the assessment year 1995-96 against the order of CIT(A) dated 15th October, 1999, on the following ground :
That the ld. CIT(A) has erred in deleting the addition of Rs. 1,43,094/- as unexplained investment in the construction of flats, without appreciating the act that such addition was made on the basis of valuation report of a technical expert namely valuation office.
parties and have perused the orders of the authorities below.
3. The assessee is a Private Limited Company, involved in construction of commercial building at Khurram Nagar. The assessee disclosed total cost of construction of the Commercial Building at Khurram Nagar, Lucknow, at Rs. 3,66,07,977/- covering the assessment years 1995-96, 1996-97 and 199.7-98. The Registered Valuer determined the total cost of construction at Rs. 3,69,15,900/-. The A.O. made a reference to the District Valuation Officer, who estimated the value at Rs. 4,70,40,000/-. As for the year wise break up, the assessee has declared investment of Rs. 5,02,144/- in the assessment year under consideration and where as the D.V.O. estimated the value at Rs. 6,45,238/-
Order under Section 255(4) of the Income-tax Act, 1961 Since there is a difference of opinion between the Members of the Division Bench, we state following point of difference and refer the same to the Hon'ble President of the Income-tax Appellate Tribunal in accordance with the provisions of Sub-section (4) of Section 255 of the Income-tax Act. The point of difference is as under:
Whether on the facts and in the circumstances of the case, the ld. Judicial Member is justified in deleting the addition made by the A.O. in the construction of the flats on the basis of the DVO's report on the basis of the decision of the Apex Court in the case of Smt Amiya Bala Paul v. CIT 262 ITR 407, or the ld. Accountant Member is justified to restore the matter back to the file of the A.O. to denovo examine the investment in the cost of construction.
The A.O. considered the difference in the cost as declared by the assessee and the cost as estimated by the D.V.O., which comes to Rs. 1,43,094/- as unexplained investment and added to the income of the assessee. Being aggrieved, the assessee filed the appeal before the First Appellate Authority.
4. The ld. CIT(A) after considering the submissions of the Representative of the assessee stated that the cost of construction of the commercial building works out to Rs. 3,73,84,049/- as against the value of Rs. 3,71,58,385/- shown by the assessee as per audited books of account. The ld. CIT(A) has stated that the difference is within 10 % and hence the same is to be ignored. Accordingly, the ld. CIT(A) deleted the said addition of Rs. 1,43,094/-. Hence, the Department is in further appeal before the Tribunal.
5. During the course of hearing of the appeal, the ld. D.R. supported the addition made by the Assessing Officer. On the other hand, the ld. Authorized Representative of the assessee supported the order of the CIT(A) in deleting the addition, He further submitted that the A.O. added the sum of Rs. 1,43,094/- on the basis of the Departmental Valuer's report. He submitted that the A.O. had no authority in law to refer for valuation of the property to the D.V.O. for estimating the cost of construction and in support of his submission placed reliance on the decision of Apex Court in the case of Smt. Amiya Bala Paul, 262 ITR 407. He further submitted that the jurisdictional High Court has held in the case of Dr. Avinesh Kumar Agarwal, 269 ITR 388 that the A.O. Under Section 131 of the Act does not have the power to refer the matter to the Valuation Officer Under Section 55A of the Act. He submitted that the Hon'ble Jurisdictional high Court relied on the decision of the Apex Court in the case of Smt. Amiya Bala Paul (supra). The ld. Authorized Representative of the assessee further submitted that the A.O. has not given any reason in rejecting the cost of construction as declared by the assessee in the assessment year under consideration and made the addition merely relying on the DVO's report, which, in view of the above decision could not be considered as the said report was not legally obtained. In reply, to, query from the Bench as to whether the matter could be restored back to the A.O. for his verification, as he has not considered the issue of investment at the time of assessment proceedings, the ld. Authorized Representative of the assessee submitted that it would amount to giving an another opportunity to the A.O. to make a de novo inquiry in respect of the matters, which have not been looked into by the Assessing Officer earlier, although the relevant information was available with him and as such the same would be against the principles of natural justice. The ld. Authorized Representative of the assessee placed reliance on the decision of the I.T.A.T Allahabad Bench, in the case of Raj Kumar Jain v. ACIT 208 ITR (AT) 22 and submitted that it was held that if the additions are not supported by evidence, the only course open to the Tribunal is to delete the addition pointing out how the addition made could not be sustained for want of adequate material and if there is no sufficient material, the addition must be deleted. He further submitted that the Tribunal also held that the Tribunal cannot order further inquiry with a view to sustain the addition. On the other hand, the ld. D.R. relied on the order of the A.O.
6. We have carefully considered the submissions of the ld. Representatives of the parties and have perused the orders of the authorities below and also the cases relied upon by the ld. Representatives of the parties.
7. We agree with the ld. Authorized Representative of the assessee that the A.O, made the aforesaid addition of Rs. 1,43,094/- based on the cost of investment estimated by the D.V.O. The A.O. has not stated any reasons for not accepting the cost declared by the assessee and/or the Registered Valuer. Now the question arises as to whether the A.O. is justified to make the addition merely on the basis of DVO's report, particularly when the A.O. has not pointed out any defects in the material produced by the assessee during the course of assessment proceedings. In this regard, it is relevant to state that the Hon'ble Supreme Court of India has held in the case of Smt. Amiya Bala Paul (supra) that reference to DVO, other than for the purpose of Section 55A and Section 269L was illegal. It was held by the Apex Court that the A.O. cannot refer the matter to the valuation Cell for estimating the cost of construction of the house property for the purpose of assessment. Since the Departmental Valuer could not be called upon by the Assessing Officer to estimate the cost of construction of the property, the report, if any, submitted by the Departmental Valuer cannot be relied upon by the Assessing Officer in estimating the cost of construction as the said report, in view of the above decision of the Apex Court, cannot be said to be a valid report. The Hon'ble Jurisdictional High Court in the case of Dr. Avinesh Kumar Agarwal (supra) has also held that the A.O. does not have the power to refer a matter to the (sic) Under Section 55A of the Act for making investigation under Section 131(1)(d). Since the A.O. merely made the above addition of Rs. 1,43,094/- based on the DVO's report, which, in view of the above decision could not be relied upon, we hold that there is no material on record to sustain the addition made by the Assessing Officer. Moreover, we observe that the ld. CIT(A) has considered the cost of investment in the property in question, in the light of the DVO's report and has found that the difference in the cost declared by the assessee and the cost estimated based on DVO's report is less than 10% after considering the objection of the assessee and as such the same is to be ignored. The ld. D.R. has not brought any material even to dispute the above finding of the ld. CIT(A). In view of the above, we uphold the order of the ld. CIT(A) in deleting the said addition of Rs. 1,43,098/- made by the Assessing Officer.
8. Before we part with this appeal, we would also like to consider the submission of the assessee made in reply to a query of the Bench as to whether the matter could be restored to the A.O. for his further investigation as the A.O., during the course of assessment proceedings, while making the addition relied on the DVO's report and did not consider the cost of investment in the property independently. In this regard, we agree with the ld. Authorized Representative of the assessee that the Tribunal has held in the case of Raj Kumar Jain (supra), that the Tribunal while deciding an appeal and the issue before it has to see whether the assessment framed by the A.O. is in accordance with law and has been properly framed on the facts. It was further held that if there is no material to support it and when the additions made by the Assessing Officer could not be sustained, it is not for the Tribunal to start investigation suo motu and supply the evidence for the Department. It was further held; that if the additions are not supported by evidence, only course open to the Tribunal is to delete the addition pointing out how the additions could not be sustained for want of adequate supporting material. It was further held that the Tribunal cannot order further inquiry with a view to sustain the addition. In the light of the above decision of the Tribunal (cited supra), we agree with the ld. Authorized Representative of the assessee that if the A.O. has made the addition which is not based on sufficient material, the said addition could not be sustained and it would not be prudent for the Tribunal to direct the Income Tax Authorities to make an inquiry in a particular manner, as the Tribunal is an appellate authority and is required to decide the issue on the basis of the material before it.
9. Therefore, we reject the ground of appeal taken by the Department by confirming the deletion made by the ld. CIT(A).
10. In the result, the appeal filed by the Department is dismissed.
11. I have gone through the order of learned Judicial Member, the facts have been narrated in his order and, therefore, I do not dwell upon the same again. I would like to only point out that there is no dispute that the Assessing Officer had relied only on the D.V.O.'s report for making the addition and did not consider the coat of investment in the property independently. There is no dispute that in view of the decision of Apex Court in the case of Smt. Amiya Bala Paul, 262 ITR 407, the addition made on the basis of D.V.O's report cannot be sustained. However, I am not in agreement with the learned judicial Member on the issue of restoring the matter back to the file of the Assessing Officer for fresh verification of the cost of construction. Admittedly at the time when reference was made to D.V.O., the decision of Hon'ble supreme Court was not there and, therefore, adopting the normal procedure in vague, of making reference to D.V.O. A.O. referred the matter to D.V.O. In my opinion the reference to D.V.O. will amount to irregular exercise of jurisdiction and has to be corrected from the stage at which the irregularity was committed.
12. Section 143 does not define the word 'material.' The Assessing Officer not being a court can rely upon material, which may not strictly be evidence admissible under the Indian Evidence Act for the purposes of making an order of assessment. Hon'ble Delhi High Court has observed in 113 ITR Page 389 as under:
while the word "evidence" may recall the oral and documentary evidence as may be admissible under the Indian Evidence Act. 1872, the use of the word "material" in Section 143(3) of the Income tax Act, 1961, shows that the Income-tax Officer, not being a court, can rely upon material which may not be strict evidence admissible under the Evidence Act for the purpose of making an order of assessment. Courts often take judicial notice of certain facts which need not be proved, while administrative and quasi-judicial authorities can take "official notice" of wider varieties of facts which need not be proved before them. Thus, not only in respect of the relevancy but also in respect of proof, the material which can be taken into consideration by the Income-tax Officer and other authorities under the Act is far wider than the evidence which is strictly relevant and admissible under the Evidence Act. Income tax Officers have to deal with such numerious cases of assessment that they can accept as correct books of account maintained in regular course of business without such a formal proof.
13. Hon'ble Rajasthan High Court in the case of Vimal Chandra Golecha 134 ITR page 119 observed as under:
In the making an assessment, the ITO does not act merely on what is technically described as "evidence in the Indian Evidence Act. Under Sections 142 and 143 of the I.T. Act, 1961, the ITO may also act as "the material gathered" by him. The word "material" shows that the ITO is not fettered by the technical rules of evidence and the like and that he may act on material which may not, strictly speaking, be accepted as evidence in a court of law.
14. From the afore mentioned decisions it is evident that for making assessment, the Assessing Officer is vested with widest power to obtain material for making assessment. If the Assessing Officer relied on such material which was not admissible in law then that would not vitiate the proceedings as this will amount to only irregular exercise of jurisdiction. It is a settled law that under such circumstances the proceedings have to be corrected from the stage which irregularities have been committed.
15. In I.T.A. No. 39 to 43/Luc/2000 A.Y. 1984-85 ITAT Lucknow 'B' Bench/in the case of Commercial Builders P. Ltd. v. The Dy. Commissioner of W. Tax Central Circle-IV, Lucknow in para -6 has observed as under :
The moot point for consideration is Whether the assessment order passed on the basis of an inadmissible evidence can be said to be a nullity in law and, accordingly, required to be annulled or it is merely an irregularity which can be set right by setting aside the assessment order with the direction for removing the said irregularity by adopting proper course of law. It is well settled that an order can be annulled only if it is passed for want of pecuniary or territorial jurisdiction or on account of lack of jurisdiction over the subject matter per se. However, if the authority is vested with the power of passing an order while exercising its legally vested jurisdiction relying on an inadmissible evidence, the whole order cannot be said to have become a nullity under law. It is a case of irregular exercise of legally vested jurisdiction.
16. Hon'ble supreme Court in case of CIT v. Assam Travels shipping service 199 ITR page-1 while considering the power of remand of the Tribunal when the Assessing Officer had imposed for less penalty then that was leviable held that though Tribunal has no right to enhance the penalty but Tribunal could remand the matter for being done in accordance with law. The Hon'ble supreme Court observed as under:
The expression "as it thinks fit" is wide enough to include the power of remand to the authority competer to make the requisite order in accordance with law in such a case, even through the Tribunal itself could not have made the order enhancing the amount of penalty. The power of the Appellate Assistant Commissioner under Section 251(1)(b) includes the power even to enhance the penalty subject to the requirement of Sub-section (2) of Section 251 of a reasonable opportunity of showing cause against such enhancement being given to the appellant assessee. This could have been done in the assessee's appeal itself filed in the present case. The power of the Tribunal to make an order of remand in such a situation is well-settled in Hukumchand Mills Ltd. v. CIT (1967) 63 ITR 232 (SC) This being the position in law, the Tribunal was not justified in taking the view that it had no other alternative except to affirm the order of the Appellate Assistant Commissioner cancelling even the lesser penalty imposed by the Income-tax Officer. In view of Section 25(1)(b) of the Act, it is also clear that the Appellate Assistant Commissioner was wrong in taking the view that he had no power to enhance the penalty in accordance with law or reaching the conclusion that the computation of penalty made by the Income -tax Officer was illegal, and that he could only cancel even the lessor penalty which had been imposed by the Income-tax Officer. It has now to be seen whether the question of law referred to the High court under Section 256(1) of the Act covered this aspect.
17. Therefore, an Appellate Court can correct the wrongs committed by the Assessing Officer by remitting the matter back to the file of the Assessing Officer. it is not the question of prudence on the part of the Tribunal in regard to remitting the matter back to the file of the Assessing Officer but is a question of assessment being made in accordance with law.
18. Learned judicial Member has referred to the decision in 208 ITR page 22(sic) which in my opinion is distinguishable on facts. There the issue was regarding estimation of house hold expenses and the learned 3rd member observed as under:
After hearing the parties and after going through the record, I did not find much difficulty in agreeing with the view that the expenses disclosed by the assessee cannot be said to be insufficient or inadequate particularly compared to the household drawings shown in the earlier years and. the income assessed of the assessee.
19. Therefore, this decision in my opinion is of not much assistance to assessees. Hon'ble Supreme Court in case of Kapurchand Shrimal v. Commissioner of Income Tax, Andhra Pradesh 131 ITR Page 451 has held that the orders of assessments are liable to be set aside but the Tribunal should direct the ITI to make fresh assessments in accordance with law.
It is well known that an appellate authority has the Jurisdiction as well as the duty to correct all errors in the proceedings under appeal and to issue, if necessary, appropriate directions to the authority against whose decision the appeal is preferred to dispose of the whole or any part of the matter afresh, unless forbidden from doing so by statute.
20. Respectfully following the decision of the Hon'ble supreme Court I direct the matter to be restored back to the file of the Assessing Officer for fresh examination of the case of investment in building without taking into consideration the D.V.O's report.
21. In the result the appeal is allowed for statistical purposes.
22. The Hon'ble President of Income Tax Appellate Tribunal exercising power Under Section 255(4) of the Income Tax Act, 1961 (hereinafter referred to as the Act) has referred the following point of difference emanated from the orders passed by the ld. Judicial Member, Shri. B.R. Mittal and the ld. Accountant Member, Shri. S.V. Mehrotra who initially heard the above referred to appeal:
Whether on the facts and in the circumstances of the case, the ld. Judicial Member is justified in deleting the addition made by the A.O. in the construction of the flats on the basis of the DVO's report on the basis of the decision of the Apex Court in the case of Smt. Amiya Bala Paul v. C.I.T. 262 I.T.R. 407, or the ld. Accountant Member is justified to restore the matter back to the file of the A.O. to denovo examine the investment in the cost of construction.
23. The facts involved for deciding the above issue have already been taken note by the ld. Judicial Member in his order but to recapitulate, I intend to briefly mention the facts giving rise to the above referred to point of difference.
24. The assessee, a limited company, was found engaged in raising construction of residential accommodation and had constructed building at Khurram Nagar and for assessment year 1995-96, the year under consideration, filed its return at a loss of Rs. 9,29,470/-. The A.O. noted that assessee company has shown work-in-progress at Rs. 5,02,144/- and further perused that assessee company had shown cost of construction incurred by it in raising the said construction. The A.O. noted that he had issued a commission on 16,12.1996 to the District Valuation Officer (in short DVO) to evaluate the extent of investment made in the construction of property at Khurram Nagar by the assessee company with year-wise breakup and DVO submitted his report dated 28.10.1997 in which he had given the cost of construction incurred by the assessee from December 1994 to March 1997 at an amount of Rs. 4,70,40,000/- as against declared cost of construction at Rs. 3,66,07,977/- by the assessee company. As per year-wise breakup, assessee had shown cost of investment in the year under consideration at Rs. 5,02,144/- and the DVO had estimated the cost of construction in the year under consideration at Rs. 6,45,238/-, The A.O. called upon the assessee to explain the difference of investment as declared by it and as given by the DVO. The assessee has also furnished report of the Registered Valuer who has declared total cost of investment till 7.3.1997 at Rs. 3,69,15,900/- which was even less to the amount of investment declared by the assessee company. The assessee company also challenged the report of DVO rather placed reliance on the report of the Registered Valuer, but the A.O. did not find force in the report of the Registered Valuer and after ignoring the same, made addition of Rs. 1,43,094/- and completed the assessment at a loss of Rs. 7,86,380/-.
25. The assessee came in appeal and contended that assessee was maintaining proper books of account duly supported with vouchers. All the books of account were duly audited under the Companies Act. The A.O. has not pointed out any defect in the books of account as provided Under Section 145 of the Act and still the A.O. made reference to the DVO for determining the cost of construction which was not called for in view of the decision of the Hon'ble Rajasthan High Court in the case, ; of C.I.T. v. Pratap Singh Amro Singh Rajendra Singh and Deepak Kumar 200 I.T.R. 788. The assessee further contended that I.T.A.T., Allahabad Bench in I.T.A.No. 2137 to 2139/Alld/1989 involving assessment years 1984-85 to 1986-87 in the case of Income Tax Officer, Varanasi v. Smt. Paryin Bari, Varanasi has also deleted the addition following the same ratio of the Hon'ble Rajasthan High Court referred to above. As the A.O. has not pointed out any defect in the books of account nor the A.O. brought any material to show that provisions of Section 145(1) of the Act were applicable and in such situation it was not expected from the A.O. to resort to any estimate but to complete the assessment after computing the income in accordance with the books of account. The other decisions were also referred to - namely Shri Harswarup Cold Storage, 27 ITD1; Anand Picture Palace v. I.T.O. (I.T.A. No. 2088/Alld/1985); Shiv Engineering Works v. I.T.O., 53 Taxman 109 and Sheikhar Chand Jain v. IAC 45 Taxman 88.
26. The ld. C.I.T (A) considered the submission of the assessee and noted that the A.O. was not justified in seeking assistance from the DVO when he has not detected any defect in the audited books of account of the assessee. He further entered into the merits of the addition and noted that the DVO while working out estimate of cost of construction has added 2% for builder's efforts while 10% is normally accepted norms and if that is deducted, addition will be less than 10% of the total cost and the same can easily be ignored and he deleted the addition.
27. The Department came in appeal.
28. The ld. Judicial Member, after considering arguments of the parties, concluded that the A.O. was not justified in making reference to the DVO and that reference was invalid in view of the decision of the Apex Court in the case of Smt. Amiya Bala Paul, 262 I.T.R. 407 and same view was taken by the jurisdictional High Court in the case of Dr. Avinesh Kumar Agarwal, 269 I.T.R. 388. Further, the ld. Judicial Member has also took into consideration the submission of the ld. D.R. that if DVO's report is treated as invalid, then matter may be restored back to the file of the A.O. for deciding the issue of actual investment in the construction of flats. The ld. Judicial Member, after placing reliance on the decision of I.T.A.T., Allahabad Bench in the case of Raj Kumar Jain v. A.C.I.T. 208 I.T.R. (AT) 22, noted that the only course open to the Tribunal is to delete the addition if there was no material on record which justify the addition. The deletion of the addition made by the ld. C.I.T (A) was found in order and ground of the Department was rejected resulting dismissal of the appeal.
29. So far as the ld. Accountant Member is concerned, he agreed in principle that the A.O. was not justified to make reference to the DVO in view of the decision of the Apex Court in the case of Smt. Amiya Bala Paul (supra) but was of the view that once reference made to DVO is taken as irregular exercise of jurisdiction, then that mistake committed by the A.O. is to be corrected from the stage from where the irregularity was committed. The ld. Accountant Member proceeded to discuss the definition of word "material" used in Section 143 of the Act for which he has referred to the case law and was of the view that in the case in hand the matter is to go back to the file of the A.O. for fresh examination of the case of investment in building without taking into consideration the DVO's report.
30. The above facts have given rise to the, above referred to point of difference.
31. The ld. counsel for the assessee had reiterated the same submissions which were taken before the Bench and further contended that the case law relied by the ld. Accountant Member were applicable to the factual background of the case in hand and the ld. Judicial Member rightly confirmed the order of the ld. C.I.T (A) because he has also taken note of the observation of the ld. C.I.T. (A) on merits in which the ld. C.I.T (A) has observed that even the light of DVO's report, difference in the cost declared by the assessee and the cost estimated by the DVO is less than 10% after considering the objection of the assessee and same is to be ignored and the ld. D.R. has not brought any material even to dispute the above finding of the ld. C.I.T (A). The ld. counsel: for the: assessee further submitted that reliance of the ld. Accountant Member on the, decision of the Hon'ble Supreme Court of India in the case of C.I.T. v. Assam Travels Shipping Service 199 I.T.R. page 1 is uncalled for because the Hon'ble Supreme Court of India in the case of C.I.T. v. Sun Engineering Works 198 I.T.R. 297 has issued a word of caution to all while following, the ratio, of the particular case in considering the factual background of another case. It has been submitted by the ld. counsel for the assessee that the Apex Court has pointed out that it is not proper to pickup a word, a clause or a sentence occurring in the judgment of the Apex Court, divorced from its context, as containing a full exposition of the law on a question when the question did not even fall to be answered in that judgment. The ld. counsel for the assessee submitted that the decision of the Hon'ble Supreme Court of India in the case of C.I.T. v. Assam Travels, Shipping Service (supra) was considered by the Third Member in the case of Raj Kumar Jain v. A.C.I.T. 208 I.T.R. (AT) 22 and it was concluded that it is not for the Tribunal to start investigation suo motu and supply the evidence for the Department if the additions are not supported by evidence. The only course left open to the Tribunal is to delete the addition pointing out how addition made could not be sustained for want of adequate supporting material. The basis for this observation was that it is for the Department to gather material and make proper assessment and the Tribunal is not in that fashion an income tax authority, The Tribunal cannot order further enquiries with a view to sustain addition because that will amount to taking sides with the parties which is not the function of the judicial authority like the Tribunal.
32. Relying upon the above, the ld. counsel for the assessee pointed out that books of account were being maintained by the assessee company as required by the Companies Act and the A.O. has not pointed out any defect in the books of account which were duly audited. The ld. C.I.T (A) has specifically mentioned this fact in the assessment order and the ld. Accountant Member has not found anything on record to rebut this observation of the ld. C.I.T (A) nor the ld. D.R. (sic) brought anything on record to meet that observation of the ld. C.I.T (A).
33. The ld. counsel for the assessee submitted that if these are the facts, the A.O. cannot be given second inning in the absence of any other material pointed out by the ld. D.R. during the course of hearing which can be the basis for sustaining the addition which was originally made by the A.O. The contention is that the ld. Judicial Member has rightly decided the issue.
34. As against it, the ld. C.I.T. (D.R) placed reliance on the order of the ld. Accountant Member and contended that the A.O. proceeded to make reference to the DVO as was the course available at that time till the Apex Court decided in the case of Smt. Amiya Bala Paul (supra) that the A.O, has no authority to issue any commission to the DVO. Once that course which was available to the A.O. is treated as invalid, second inning to the A.O. is must and the ld. Accountant Member was justified in restoring the matter back to the file of the A.O.
35. I have considered the rival submissions and perused the record carefully.
36. Admittedly, the A.O. was not justified in making reference to the DVO to estimate the cost of construction as held by the Apex Court in the case of Smt. Amiya Bala Paul (supra) which has since been followed by the jurisdictional High Court in the case of Girdhar Gopal Gulati v. Union of India and Anr. 269 I.T.R. 45 and again in the case of Dr. Avinesh Kumar Agarwal v. Assistant Director of Income-tax (Investigation), (supra), the same is the view of the jurisdictional High Court. Not only this, the Hon'ble Punjab and Haryana High Court in the case of C.I.T. v. Ganesh Rice Mills 145 Taxman 452 had also opined and it has been held that if report of DVO is excluded from consideration, a reference made DVO was invalid, then there was no material whatsoever warranting any addition on account of unexplained investment and the view of the Tribunal deleting the addition based on the report of DVO was found sustainable. (sic) these are the facts, then addition was to be deleted as done by the ld. Judicial Member.
37. Apart from it, the ld. C.I.T(A) had had given a categorical finding that assessee was maintaining books of account as per Companies Act which were audited also. The A.O. has not pointed out any defect in the books of account which were duly supported with vouchers, etc. The ld. D.R. has also not brought anything on record to show that books of account suffer from any defect. If these are the factual position, then cost of construction declared by the assessee is duly supported by books of account and relevant vouchers and further the Department has also not brought anything on record to show that there may be justification for restoring the matter back to the file of the A.O. No doubt, the decision of the Hon'ble Supreme Court of India in the case of C.I.T. v. Assam Travels Shipping Service (supra) is there describing the powers of the Tribunal to send the matter back to the file of the A.O., but one has to see the context in Which the ratio was rendered by the Hon'ble Supreme Court of India.
38. In the situation which is before me, I may refer the case of Raj Kumar Jain v. A.C.I.T. 208 I.T.R.(AT) 22 in which Shri. CH. G. Krishnamurthy, the then President of the I.T.A.T. sitting as Third Member has decided the issue after taking note of the case of Kapurchand Shrimal v. C.I.T. 131 I.T.R. 451 and other cases relied by parties and relevant observations are being reproduced which are as under:
He also referred to the decision of the Supreme Court in the case of Kapurchand Shrimal v. C.I.T. (1981) 131 I.T.R. 451, where the Supreme Court has held that the jurisdiction of an appellate authority extends to correct all errors in the proceedings under appeal and to issue, if necessary, appropriate directions to the authority against whose decision the appeal is preferred. In my opinion, the ld. Accountant Member has failed to grasp the real purpose of the Tribunal. The Tribunal acting as an appellate authority has to see whether the assessment framed by the A.O. and whether the appellate order appealed against were according to law and properly framed on facts and whether there was sufficient material to support it. When there is no material to support it and when as observed by the ld. Accountant Member and additions made by the A.O. could not be sustained, it is not for the Tribunal to start investigations suo motu and supply the evidence for the Department. If the additions are not supported by the evidence, the only course open to the Tribunal is to delete the additions pointing out how the additions made could not be sustained for want of adequate supporting material. It is for the Department to gather the material and make proper assessments and the Tribunal is not in that fashion an income-tax authority. Under the income-tax authorities stipulated under the Income-tax Act, the income-tax Appellate Tribunal is not one of them. It is purely an appellate authority. Therefore, the subject of the appeal before the Tribunal is whether the addition or disallowance sustained was in accordance with law and supported by material. If there is no sufficient material, the addition must be deleted. The Tribunal cannot order further enquiry with a view to sustain the addition. This will amount to taking sides with the parties which is not the function of a judicial authority like the Tribunal.
39. That clinches the very issue involved before me that Department cannot he given fresh inning in the absence of any material brought on record by the Departmental authorities. The scope of the Tribunal has been specifically defined and last observation is very material in which it has been opined by the Third Member that the Tribunal cannot order further enquiry with a view to sustain addition.
40. After considering all the factual position as noted above, I may also observe that no doubt the ld. Accountant Member has restored the matter back to the file of the A.O., but no guidelines has been given to the A.O. how he will be collecting evidence, particularly when books of account of the assessee company were being maintained as required under the Companies Act and the same were duly audited. Admittedly, no defect has been pointed out in the books of account and cost of construction returned by the assessee was found duly supported by relevant vouchers and documentary evidence. Apart from it, the assessee has also filed report of the Registered Valuer who has also given cost of construction which is approximately same as returned by the assessee company. It is to be noted that report of the Registered Valuer is also an important piece of evidence and in this connection I may refer the decision of I.T.A.T., Patna Bench in the case of Shanti Complex v. I.T.O. 237 I.T.R. (AT) 27 in which the importance of Registered Valuer was also discussed and it was opined that report of an export only acts as an opinion before a judicial or quasi-judicial authority to whom it is submitted. That report is open to judicial scrutiny, by higher judicial forum and in case there are two experts' opinion before the judicial forum, it cannot be said that DVO's report carries more weight or DVO is superior to other. Both are statutory creations and expected to perform functions provided by the relevant statute. The A.O. has to consider the report of the Registered Valuer also effectively and arrive at his own conclusion. In this case in hand, the report of the Registered Valuer has been ignored by the A.O. on flimsy ground and that was not the correct way to appreciate the same. In view of this also, the entries in the books of account duly get support from the report of the Valuer also. In such circumstance, no fruitful purpose would have been served in remanding the matter back to the file of the A.O.
41. The cumulative result of the findings of the above, the view taken by the ld. Judicial Member is just and addition was liable to be deleted without remanding the matter back to the file of the A.O. Accordingly I am in agreement with the view taken by the ld. Judicial Member.
42. Now the matter may go back to regular Bench for deciding the appeal as per law.