Income Tax Appellate Tribunal - Lucknow
Pawan Agarwal vs Dy. Cit (Inv.) on 19 November, 2003
Equivalent citations: (2004)87TTJ(LUCK)328
ORDER
Phool Singh, J.M. All these three appeals of the assessee are directed against three separate orders recorded by the Commissioner (Appeals)-II, Lucknow, by which she has decided the appeals of the assessee involving assessment years 1989-90, 1990-91 & 1991-92. As grounds in all these three appeals of the assessee are common, these three appeals were heard together and are being disposed of by this composite order for the sake of convenience.
2. Relevant facts giving rise to these three appeals are that for assessment year 1989-90, the assessee filed return showing total income at Rs. 1,57,305'on 24-9-1990 and return was processed and intimation under section 143(1) (a) of the Income Tax Act, 1961 (hereinafter referred to as the 'Act'), was issued on 24-10-1990, the copy of which had also been filed on record by the assessee accepting the total income. It is also on record that a search under section 132 of the Act was conducted at the residential as well as business premises of the assessee on 18-6-1992, in which the department had seized the books of account and other relevant records of the business of the assessee. After search, the Dy. CIT, Special Range I, Lucknow, who was authorised to complete assessment in respect of the assessee, issued a notice under section 148 of the Act on 12-2-1993, for assessment year 1989-90, copy appearing at p. 68 of the paper book and also issued a notice under section 142(1) of the Act on 5-7-1994, copy appearing at p. 69 of the paper book, calling for the necessary information in respect of assessment year 1989-90. It is also on record that after making proper enquiries, the assessing officer dropped the notice issued under section 148 of the Act by passing an order on 7-3-1995, copy of which is appearing at page No. 70 of the paper book.
3. For assessment year 1990-91, the assessee filed return of income on 18-7-1992 and income returned was Rs. 1,49,710. It is admitted fact that the assessee filed copies of balance sheet, P&L a/c and all relevant facts relating to construction of building "Rohit Bhawan" upto 31-3-1990 and the assessing officer, who is again same, Shri Sudhakar Tiwari, Dy. CIT, Special Range I, Lucknow, completed assessment on 30-3-1993, under section 143(3) of the Act after making certain additions as income was assessed at Rs. 1,59,482. Copy of this assessment under section 143(3) for assessment year 1990-91 is appearing at pp. 1 to 7 of the paper book II of the assessee. The assessee challenged certain additions made by the assessing officer and appeal was disposed of on 28-3-2002, by the learned Commissioner (Appeals).
4. For assessment year 1991-92, the assessee filed return on 24-2-1992, along with copies of balance sheet, P&L a/c, etc. and assessment was completed by Dy. CIT, Special Range I, on 30-3-1994, under section 143(3) at an income of Rs. 37,69,500 and copy of assessment order is appearing at pp. B-16 of the paper book. Feeling aggrieved from certain additions, the assessee preferred an appeal before the CIT, II, Lucknow, who decided the appeal vide order dated 23-12-1994, and copy of that order is appearing at pp. 17-21 of the paper book.
5. From the above, it is clear that assessment for assessment years 1989-90 to 1991-92 were over by 31-3-1994 and even appeal of assessment year 1991-92, stands disposed of on 23-12-1994. On 11-7-1995, the concerned assessing officer made a reference to DVO, Kanpur, under section 131(1) (d) of the Act in respect of valuation of "Rohit Bhawan" and DVO, Kanpur, submitted his report on 21-3-1996. The assessing officer, on the basis of report so submitted by the DVO, Kanpur, recorded the reasons, which are as under and copy thereof is appearing at p. 15 of the paper book:
"Reasons for belief that income has escaped assessment for assessment year 1991-92, the assessee had filed return disclosing an income of Rs. 1,44,100 from various sources as per computation given below".
Rs.
(i) Income from house property 71,543
(ii) Loss from business (-)74,341
(iii) Income from other sources 1,83,596 1,81,096 Less: Deduction under section 80CCA 20,000 Deduction under section 80CCB 10,000 Deduction under section 80L 7,000 37,000 1,44,100 From November, 1988, the assessee had started constructing a commercial complex "Rohit Bhawan" at Sapru Marg, Lucknow, making substantial investment.
The assessment records do not evidence the filing of details of investment in the multi-storey complex by the assessee nor does it evidence its consideration by the assessing officer in the assessment order dated 31-3-1994 or papers available in the records of the relevant year. A few details found after the assessment gave a basis to correctly ascertain the cost of construction of the said complex. Therefore, it was decided to refer the matter to the District Valuation Officer under section 131(1) (c) of the Income Tax Act.
The DVO had taken a few details from the assessee and a few collected by him on the spot measurement to note the quality of construction and also the period of construction. His report dated 21-3-1996, was submitted to the assessing officer; as per report cost of investment in the said complex is Rs. 1,97,64,300 with reference to the covered area of 7,785 sq. mtrs. in the periods relevant to assessment years 1989-90 to 1992-93. The DVO refers to the admitted cost of Rs. 1,01,95,000 by the assessee before him, although no such admission or details in respect thereof were given at the assessment stage.
Without prejudice to the resources of admitted cost of investment in the absence of such details on the record, the following year-wise difference emerged between the admitted cost and the determined cost as per DVO.
Finance year Actual cost of construction estimated by the Valuation Offlcer (Rs.) Cost of construction disclosed by the assessee (Rs.) Difference (Rs.) 1989-90 41,29,275 21,30,000 19,99,275 1990-91 1,11,33,634 57,43,000 53,90,534 1991-92 30,06,810 15,51,000 14,55,810 1992-93 14,94,681 7,71,000 7,23,681 The total admitted cost of construction by the assessee with reference to the total covered area of 7,785 sq. mtrs. works out to Rs. 1,309 per sq. mtr., which is far below the cost of construction in a non-residential building like village primary school as per PWD rate which is Rs. 2,200 per sq. meter and also falls much below the average cost of construction of Rs. 2,538 per sq. meter equal to the PWD rates of load bearing non-residential "A" class building as per PWD in the year 1991.
In the light of aforesaid facts, I have reasons to believe that an income of Rs. 19,99,275 liable to be treated under section 69 and chargeable to tax even with reference to the admitted cost and determined cost has escaped assessment for failure to fully and truly disclose the material facts relevant to the investment in the constructing of "Rohit Bhawan" complex".
6. On the basis of the reasons so recorded, the assessing officer was of the view that the assessee had shown the investment in the construction of Rohit Bhawan , at an amount of Rs. 1,01,95,000, while DVO vide his report dated 21-3-1996, has estimated the cost of investment in the said complex at Rs. 1,97,64,300. As there was difference in the cost of construction as returned by the assessee and estimated by the DVO, the assessing officer initiated proceedings by serving a notice under section 148 of the Act for assessment year 1989-90 and called upon the assessee as to why the difference so arrived at, be not added to the total income of the assessee. The assessee raised legal plea about reopening and also contested the report of the DVO on merit. The assessing officer after considering the submissions, was not in favour of the assessee and he made an addition of Rs. 19,99,275 to the total income, which was on account of difference in between the cost of "Rohit Bhawan" as returned by the assessee and estimated by the DVO. For assessment year 1990-91 and assessment year 1991-92, the assessing officer made the addition in respect of differences, which were Rs. 53,90,534 and Rs. 14,55,810, respectively. ,
7. The assessee preferred appeals and in assessment year 1989-90, the assessee challenged the notice under section 148 of the Act, which was solely based on the report of the DVO. The other plea of the assessee was that the assessment for assessment year 1989-90 was over by issuing intimation under section 143(1) (a) of the Act and even thereafter, the assessing officer reopened the case of the assessee for assessment year 1989-90 by issuing a notice under section 148 of the Act, but after making necessary inquiry, the assessing officer did not find any substance to proceed with and filed the proceedings for assessment year 1989-90. The third plea of the assessee was that there was no proceedings pending before the assessing officer when he made reference to DVO under section 131(1) (d) of the Act. All these legal pleas were considered and learned Commissioner (Appeals) did not find substance and rejected the same. After the learned Commissioner (Appeals) proceeded to decide the issue on merit and after considering all the factual positions regarding objection of the assessee against estimate arrived at by the DVO, the learned Commissioner (Appeals) gave some relief and decided the appeal vide order dated 28-3-2002, which is challenged by the assessee in ITA No. 654/Luc/2002.
8. For assessment years 1990-91 and 1991-92, the assessee raised similar pleas and learned Commissioner (Appeals) decided the same following her order for assessment year 1989-90 and assessee had preferred ITA Nos. 656 and 656/Luc/2002.
9. Shri K.R. Rastogi, FCA, has raised several legal points. Giving out the factual position as stated above, the learned counsel submitted that admittedly the assessing officer made the reference to the DVO on 1 1-7- 1995, under section 13 1 (1)(d) of the Act and admittedly there was no proceedings pending before the assessing officer in respect of assessment years 1989-90, 1990-91 & 1991-92. The learned counsel pointed out that assessment for assessment year 1989-90 was over on 24-10-1990, while assessment for assessment year 1990-91, was completed under section 143(3) on 30-3-1993, and assessment for assessment year 1991-92, was completed on 30-3-1994, under section 143(3) of the Act. The learned counsel submitted that it is settled proposition of law that reference to DVO can be made only when there is some proceedings pending before the assessing officer and in case no proceeding is pending, then the assessing officer was not justified to make reference. To substantiate this plea, the learned counsel for the assessee had placed reliance on different case law and the following is the list of the cases referred by the learned counsel for the assessee:
(i) DwiJendra Lal Brahamchari & Ors. v. New Central Jute Mills Co. Ltd. & Anr, (1978) 112 ITR 568 (Cal),
(ii) Jamnadas Madhavji & Co. & Anr. v. JB. Panchal, ITO & Anr. (1986) 162 NR 331 (Bom).
(iii) ITO v. James Joseph O'Gorman (1993) 204 ITR 454 (Cal),
(iv) Smt. Rina Sen v. CIT (1999) 235 ITR 219 (Pat),
(v) G.M. Breweries Ltd. & Anr. v. Union of India & Ors. (2000) 241 ITR 446 (Bom),
(vi) Smt. Kamlesh Kumari Sharma v. ITO (1998) 67 ITD 29 (Jab),
(vii) Dr. Arjun D. Bharad v. Income Tax Officer (2002) 83 ITD 774 (Nag),
(viii) Income Tax Officer v. Tandel Automobiles (1990) 38 TTJ (Ahd) 438.
10. The learned counsel submitted that in all these cases, the different Hon'ble High Courts have laid down that existence of pending proceedings is a condition precedent and sine qua non for the exercise of power along with under section 131(1) of the Act and in the absence of any pendency of such proceedings, action of the assessing officer to issue commission or to call for records, etc., are outside the jurisdiction of the assessing officer. The different Benches of the Tribunals following the analogy of the different Hon'ble High Courts referred to above have also decided the issue in favour of the assessee by observing that the section 131(1) of the Act gives powers to the assessing officer or other authority, which are vested in a Court, but when court is trying the suit and similar analogy will be applicable to the assessing officer as the assessing officer can exercise the power under section 131(1) of the Act, when there is pendency of any proceedings before him. The assessing officer cannot exercise the power under section 131(1) of the Act before or after conclusion of the proceedings. On the basis of above analogy of law as laid down by different High Courts as well as by different Benches of the Tribunals, the learned counsel submitted that the assessing officer was not justified to make reference when nothing was pending in respect of assessment years 1989-90 to 1991-92.
11. The next plea raised by the learned counsel for the assessee is that the assessee was engaged in the business of construction of multi-storeyed complex and was maintaining books of account duly supported with vouchers. The assessee had been filing returns of income along with all necessary documents. The assessing officer completed the assessment after going through all the material for these three assessment years. It was also submitted that after search under section 132(1) of the Act, the books of account of the assessee along with all related materials were seized by the department. Order under section 132(5) of the Act was framed by the department and copy of the same is appearing at pp. 27 to 345 of the paper book, which was also prepared by Shri Sudhakar Tiwari, Dy. CIT, Special Range I, who is the assessing officer of the assessee for assessment year 1989-90. No addition was proposed in the said order under section 132(5) of the Act, inspite of the fact that all the seized material relating to construction was with the department. The learned counsel submitted that once books of account were with the department and assessment was completed under section 143(3) of the Act and no defect had been pointed out by the assessing officer in the books of account, the reference to DVO is bad ab initio. The learned counsel submitted that the assessing officer was under obligation to point out any discrepancy in the cost of construction, receipt, etc., as noted in the books of account supported with vouchers, but nothing was done by the assessing officer and the assessing officer was not justified to make reference without coming to the conclusion prima facie that the version of the assessee relating to cost of construction is understated.
12. The learned counsel submitted that Hon'ble Rajasthan High Court in the case of CIT v. Pratap Singh, Amro Singh, Rajendra Singh (1993) 200 ITR 788 (Raj) had laid down that in case proper books of account were being maintained by the assessee and expenditure books were found supported by vouchers, then the assessing officer has no business to make the reference to valuation cell without pointing out any defect and without rejecting the books of account. The reference so made to DVO was held invalid. This view had been followed by the different Benches of the Tribunals and he referred to the view of the Tribunal, Chermai Bench (TM), in the case of M. Selvaraj v. Income Tax Officer (2002) 258 ITR 82 (Chennai)(AT), in which the assessing officer made reference to the DVO without rejection of books of account and without recording the finding that cost of construction was incorrect. The Bench concluded by majority that reference to the valuation officer was not valid and report of valuation officer cannot form basis of addition as unexplained investment. The other decision is that, of Shiv Engg. Works v. Income Tax Officer (1990) 53 Taxman 109 (Jp) in which Tribunal Jaipur Bench on identical facts held that the assessing officer was not justified to make reference to DVO without pointing out defects in the books of account. Other decision has also been referred to on the same point including the decision of Tribunal Allahabad Bench A, in ITA Nos. 2137 to 2139/All/1989 in the case of Income Tax Officer v. Smt. Parveen Bari, for the assessment years 1984-85 to 1986-87 decided on 29-2-1996, the copy is appearing at pp. 115 to 117 of the paper book, which is also on the same line. The other decision referred to by the learned counsel is Tribunal, Lucknow Bench, in the case of Dy. CIT v. Janki Prasad Garden Enclave (P) Ltd. in ITA No. 54/All/1999 decided on 28-2-2003, the copy of which is appearing at pp. 135-136.
13. On the basis of these facts, the learned counsel for the assessee submitted that the assessing officer admittedly had not rejected books of account, rather assessments were completed under section 143(3) in respect of these assessment years before us and without rejecting the books and without recording a prima facie finding that the assessee had understated the cost of construction, the assessing officer cannot make reference to the DVO, and addition on the basis of DVO's report is unwarranted.
14. The other plea of the assessee was that the proceedings have been initiated under section 147 of the Act by issuing of notice under section 148 of the Act. The contention of the learned counsel for the assessee is that the assessee had filed returns for all these assessment years duly supported with the balance sheet, P&L a/c and for assessment years 1990-91 and 1991-92 of the Act (sic) after necessary inquiries conducted by the assessing officer. Even the nature of business noted by the assessing officer in the assessment order so framed was "construction of building". Once the assessing officer has applied the mind in respect of all the facts and figures submitted before him during the assessment proceedings, then the assessing officer has no business to reopen the assessment completed under section 143(3) of the Act as it amounts to change of opinion on the same facts and figures. The learned counsel placed reliance on the decision of ITO v. Lakhmani Mewaldas (1976) 103 ITR 437 (SC). The learned counsel also referred to the decision of apex court in the case of Ganga Saran & Sons (P) Ltd. v. ITO & Ors. (1981) 130 ITR 1 (SC), in which it was laid down that the belief entertained by the Income Tax Officer must not be arbitrary or irrational. It must be reasonable or in other words, it must be based on reasons, which are relevant and material. Their Lordships observed that the Court, of course, cannot investigate into the adequacy or sufficiency of the reasons, which have weighed with the Income Tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under section 147(a) of the Act, The learned counsel also placed reliance on the decision of CIT v. SR. Construction (2002) 172 CTR (MP) 458, in which their Lordships have laid down that once the cost of construction shown by the assessee was considered and found acceptable on the basis of account books and other relevant documents produced by the assessee before the assessing officer and no valid reason was recorded for initiation of proceedings under section 147, subsequent valuation report collected from the valuation officer cannot justify the reopening of the assessments and their Lordships confirmed the view of Tribunal and concluded that no referable question of law arises.
15. The learned counsel submitted that above analogy is fully applicable to the facts of the case. The learned counsel also referred to the decision of Tara Chand Mundhra v. Union of India (2000) 163 CTR (Raj) 631, in which their Lordships have laid that report of the valuer cannot singly be made basis of information as required under section 147(b) of the Act to issue notice under section 148 of the Act. The learned counsel submitted that, no doubt, this is in respect of old provisions of section 147, but fact remains that the assessing officer has to record reasons to believe and this belief must be based on material, and in the case in hand, the report of the DVO alone was there and as pointed out above, the learned counsel submitted that the said report is not to be looked into as very action of making reference is not in accordance with law. The learned counsel also pointed out that admittedly reference made by the assessing officer to DVO, Kanpur, was under section 131(1) (d) as evident from the copy of valuation report appearing from pp. 63 to 73 and the Hon'ble Supreme Court of India in the case of Smt. Alniya Bala Paul v. CIT (2003) 130 Taxman 511 (SC), had laid down that the assessing officer had no authority to make reference to valuation officer for estimating the cost of construction under section 131(1) (d) of the Act, and additions made on the basis of report of DVO were ordered to be deleted. The contention is that this reasoning is fully applicable to the facts of the case and additions are liable to be deleted.
16. On the basis of this above factual position, the learned counsel submitted that the additions made in the assessment years 1989-90, 1991-92 and 1992-93 are liable to be deleted on the above legal pleas raised by him.
17. The learned departmental Representative made efforts to meet the arguments placed by the learned counsel for the assessee, but no case law was referred by her in reply to the cases referred by the learned counsel for the assessee.
18. We have considered the rival submissions and perused the records carefully and have also gone through the case law.
19. We have given out the factual position which has come on record about the filing of return by the assessee for assessment years 1989-90 to 1991-92 and it is admitted facts on record that assessment for assessment year 1989-90 was completed under section 143(1) of the Act. The assessing officer tried to reopen the case by serving a notice under section 147 of the Act, but admittedly those proceedings were dropped as apparent from copy of order recorded on 7-3-1995, appearing at p. 70 of the paper book. The assessee filed return for assessment years 1991-92 and 1992-93. Copy of assessment order for assessment year 1991-92 completed under section 143(3) of the Act on 30-3-1994, is appearing at pp. 8-16 and copy of assessment order under section 143(3) of assessment year 1992-93 is appearing at pp. 22-27 of the paper book completed on 7-3-1995. Even the appeal for assessment year 1991-92 was disposed of by the Commissioner (Appeals) on 23-12-1994. From the above factual position, it is clear that no proceeding for assessment was pending before the assessing officer for assessment years 1989-90 to 1991-92 on 11-7- 1995, when admittedly the assessing officer made a reference to DVO, Kanpur, for making estimate of the construction of "Rohit Bhawan. "
20. Before proceeding with the case law referred to by the learned counsel for the assessee, it will be in the fitness of things to reproduce the provisions of section 131(1), which are relevant and the same are as under:
"131. (1) The assessing officer, Dy. Commissioner (Appeals)'s, JT CIT, Commissioner (Appeals) and Chief CIT or CIT 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 Bank ing company and examining him on oath;
(c) compelling the production of books of account and other documents; and
(d) issuing commissions."
21. The law as laid down by the different High Courts is quite specific on this point that the assessing officer has no authority to issue the commission to DVO or td any one, if no proceeding is pending before him. In the case of Dwijendra Lal Brahamchan & Ors. v. New Central Jute Mills Co. Ltd. & Anr. (supra), the Hon'ble Calcutta High Court was seized with the issue relating to powers of the Income Tax Officer under section 131 of the Act and their Lordships have laid down that powers of Income Tax Officer under section 131 are co-extensive with that of a court trying a suit under section 30 of CPC read with rules 12, 14 and 15 of order 11 of the Court. The officer can summon any document, if any suit is pending before him and not otherwise. This view was approved by Hon'ble Bombay High Court in the case of Jamnadas Madhvji & Co. v. J.B. Panchal, Income Tax Officer (supra) and material observations of their Lordships are as 'under:
"The officers mentioned in section 131(1) of the Income Tax Act, 1961, viz., the Income Tax Officer, Appellate Assistant Commissioner, Inspecting Assistant Commissioner, Commissioner (Appeals) and CIT are conferred with the same powers as are vested in a court under the Code of Civil Procedure, 1908, when trying a suit. The Code of Civil Procedure confers upon a court powers, for the exercise whereof, existence of a suit or a proceedings is a sine qua non. In pari materia, therefore, powers in respect of matters mentioned in section 131(1) , viz., (a) discovery and inspection; (b) enforcing the attendance of any person and examining him on oath; (c) compelling the production of books of account and other documents; and (d) issuing commissions, can be exercised only if a proceeding is pending before the concerned officer and not otherwise.
22. The same view is laid down in the case of Income Tax Officer v. James Joseph Gorman (supra) and in the case of Smt. Rina Sen v. CIT (supra), in which it was laid down that existence of pending proceeding is condition precedent and sine qua non for the exercise of powers under section 131(1) of the Act. Further, Hon'ble Bombay High Court in the case of G.M, Breweries Ltd. & Anr. v. Union of India & Ors. (supra), has also gone a step further by defining the expression "for the purpose of the Act" and laid down that it must mean for the purposes of proceedings under the Act pending before the concerned authority. According to their Lordships, the assessing officer can exercise the power under section 131(1) of the Act for completing the assessment only when case is pending before him, otherwise not. The Tribunal Benches have also followed the above analogy in the cases referred to by the learned counsel for the assessee. No contrary view has been cited by the learned departmental Representative.
23. The conclusion will be that the assessing officer was admittedly not having any proceedings relating to assessment years 1989-90 to 1991-92 pending on the date when he made reference to DVO on 11-7- k995. The very action of making reference is invalid and addition made on the basis of that is not sustainable.
24. The other point agitated by the assessee learned counsel for the assessee is that it was a case of search. Order under section 132(5) of Act was framed. No addition was proposed as apparent from the copy of that order, which is appearing at pp. 27-34 of the paper book. The assessee had also filed all relevant documents viz., balance sheet, P&L a/c and other vouchers etc., along with the return for assessment years 1989-90 to 1991-92 and assessment had been completed. The learned counsel also submitted that in assessment years 1990-91 and 1991-92 addition of Rs. 2,20,994 was made by the assessing officer respectively on the basis of seized books of account regarding the construction of Rohit Bhawan. It means the assessing officer had already applied the mind while making the addition, which was also subject matter of appeal before the Commissioner (Appeals).
25. The contention of the learned counsel is that unless and until the assessing officer has not pointed out any other defect, he was not justified to make reference to DVO and that contention of the assessee is getting, corroboration from the view by the Hon'ble Rajasthan High Court in the case of CIT v. Shri Pratap Singh, Amro Singh's. Rajendra Singh (supra) and the same view was also taken by the different Benches of the Tribunals referred to by the learned counsel and particularly in the case of Modern Construction Development & Project Promotion v. Assistant Commissioner (1997) 63 ITD 235 (Cal). Further, the Hon'ble Madhya Pradesh High Court in the case of CIT v. SA Construction (supra) has laid down as under:
"Provision as contained under section 148 is not unruly horse, but is guided on certain conditions. Sub-section (2) of section 148 mandates the assessing officer to record his reasons before issuing any notice to make a reassessment. Two conditions must exist; (1) that the Income Tax Officer has reason to believe that income chargeable to income-tax had been under-assessed; and (2) that he has also reason to believe that such under-assessment' had occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. These conditions are cumulative and precedent to the exercise of jurisdiction to issue a notice.
Valuation, which was put by the assessee was considered and was found acceptable on the basis of the account books and the other relevant documents produced by the assessee to the assessing officer. Thus, it was a case of change of opinion by the assessing officer which would not justify the action of reopening of the assessment. Since the material was placed and was accepted and no defect was found, no material was available, hence, it cannot be said that there wasany reason to believe available to the assessing officer to reopen the assessment.,,
26. The conclusion arrived by their Lordships as under:
"Once the cost of construction shown by assessee was considered and found acceptable on. the basis of account books and other relevant documents produced by the assessee before the assessing officer and no valid reason was recorded for initiation of proceedings under section 147, subsequent valuation report collected from the valuation officer cannot justify the reopening of the assessment, no referable question of law arises."
27. The above conclusion arrived at by their Lordships is fully applicable to the factual position of the case, as cost of construction shown by the assessee was considered and found acceptable on the basis of account books and other relevant documents produced by the assessee before the assessing officer. The assessing officer cannot be allowed to refer the matter to DVO and after collecting the evidence in the shape of DVO's report to make the addition in respect of cost of construction as laid down by their Lordships. As in the case in hand, same is the fact and relying upon the same analogy no addition is sustainable.
28. The last point, which was -also agitated by the learned counsel is about reopening of the proceedings. The assessing officer had already considered all the factual positions in the assessment so completed and there was no fresh material except the report of DVO with him. We have already concluded that the step of the assessing officer to make reference under section 131(1) of the Act without pendency was invalid and this evidence collected by the assessee is not justifiable.
29. In this connection, it is also relevant to point out that the learned Commissioner (Appeals) while deciding these legal points had relied upon the decision of apex court in the case of Pooran Mal v. Director of Inspection (Inv) (1974) 93 ITR 505 (SC) and that of CIT v. Dr. Nandlal Tahliani (1988) 172 ITR 627 (SC) to substantiate the plea that even if the step of the assessing officer was not justified to make the reference to DVO, the evidence so collected is admissible. That reasoning laid down by their Lordships was in respect of the material, which was seized during the search operation and their Lordships concluded that the'department cannot be prohibited from using such material. The position would have been different in case of the assessee certain incriminating documents leading to unexplained investment not shown in the books of account was detected during the search. Admittedly, it is not the case of the department and, thus, reasonings relied by the learned CIT were not applicable to the factual position of the case as nothing incriminating was detected at the time of search carried out at the residence and the business premises of the assessee.
30. In the end, the assessee is having support from the decision of Hon'ble Supreme Court of India in the case of Smt. Amiya Bala Paul v. CIT (supra) in which their Lordships have decided that the assessing officer has no right to make reference under section 131(1) (d) of the Act and to reopen the completed assessment and to make addition. That is also applicable.
31. The accumulating result of the above discussion is that all the legal pleas are against the department and it was not a case in which the assessing officer could have made reference to the DVO under section 131(1) (d) of Act when admittedly no proceeding was pending in respect of these assessment years 1989-90 to 1991-92 and no justification to reopen the assessments, which were completed under section 143(3) and to make addition.
32. All the appeals stand allowed and additions stand deleted.