Income Tax Appellate Tribunal - Jaipur
Hotel Surya Vilas Palace, Bharatpur vs Acit-Circle, Bharatpur, Bharatpur on 14 June, 2017
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR
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BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YADAV, AM
vk;dj vihy la-@ITA No.738/JP/15
fu/kZkj.k o"kZ@Assessment Year : 2011-12
M/s Hotel Surya Vilas Palace cuke The ACIT, Circle,
Vill. Jatoli Ghana, NH-11 Agra Vs. Bharatpur, (Raj.)
Road, Bharatpur, (Raj.)
LFkk;h ys[kk la-@thvkbZvkj la-@PAN No. AAFFH4837H
vihykFkhZ@Appellant izR;FkhZ@Respondent
fu/kZkfjrhdh vksj ls@Assessee by : Shri Rajendra Agrawal (C.A.)
jktLo dh vksj ls@Revenue by : Smt.Roshanta Meena (Addl.CIT)
lquokbZ dh rkjh[k@Date of Hearing : 07.06.2017
?kks"k.kk dh rkjh[k@Date of Pronouncement: 14/06/2017.
vkns'k@ORDER
PER SHRI VIKRAM SINGH YADAV, A.M.
This is an appeal filed by the assessee against the order of Ld. CIT(A), Alwar dated 13.07.2015 for A.Y. 2011-12 wherein the assessee has taken the following three grounds of appeal:-
"1. The ld CIT(A) has erred in confirming that the ld. AO has not erred in making reference to DVO u/s 142(2A) of the I.T. Act, 1961.
2. The ld CIT(A) has erred in confirming that the AO has not erred in rejecting the books of accounts u/s 145(3) of the I.T. Act, 1961.
3. The ld CIT(A) has erred in confirming the addition of Rs. 3,02,977/- out of total addition of Rs. 2,36,74,724/- made by the ld. AO on account of difference in cost of construction shown by the assessee and the valuation as per valuation report of DVO."ITA No. 738/JP/15
M/s Hotel Surya Vilas Palace Vs. ACIT, Alwar.
2. Regarding the first ground of appeal, the ld. AR submitted that Section 142(2A) of the I.T. Act, 1961 does not provide any power for the ld. AO to made any reference to the DVO. It is section 142A of the I.T. Act, 1961 which provides the power to the ld. AO for making reference to the DVO, but in terms of sub-section (1) of section 142A, the reference to DVO can only be made where an estimate of the value of any investment referred to section 69 or section 69B or section 56(2) is required to be made. But in the case of the assessee, the ld. AO before making reference to the DVO, has not required any estimate of the value of any investment referred to section 69 or section 69B or section 56(2) of the I.T. Act, 1961.
2.1 It was submitted that as evident from the DVO report, the ld. AO made reference to the DVO vide letter No. 1036 dt. 13.01.2014 and evident from Certified copy of ld. AO note sheet from 25.07.2013 to 16.01.2014, before 13.01.2014 i.e., the date of reference to the DVO, the ld. AO neither examined the books of accounts of the assessee nor rejected the books of account before making any reference to the DVO, the assessee's books of account had to rejected by the ld. AO. Hence keeping in view of the above, the ld. AO has erred in making reference to DVO u/s 142(2A) of the I.T. Act, 1961.
2.2 In support, reliance was placed on the judgment of Jodhpur bench of ITAT in the case of Prithavi Raj Bohra v. ITO (2012) 150 TTJ 0057 wherein after considering the judgment of the Hon'ble Supreme Court in the case of Sargam Cinema v. CIT (2010) 328 ITR 513 (SC) "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 DVO without the books of account being rejected".
2 ITA No. 738/JP/15M/s Hotel Surya Vilas Palace Vs. ACIT, Alwar.
2.3 It was submitted that the ld. CIT(A) leaving aside all the above facts, circumstances and submissions very arbitrarily decided that "AO was justified in making a reference to DVO u/s 142(2A) of the IT Act on account of the deficiencies noticed in the course of examination of records and accounts books of the appellant while as evident from the certified copy of ld. AO note sheet from 25.07.2013 to 16.01.2014, before 13.01.2014 i.e., the date of reference to the DVO, the ld. AO neither examined the books of accounts of the assessee nor rejected the books of account and before making any reference to the DVO assessee's books of account had to rejected by the ld. AO.
3. The ld DR is heard who has vehemently argued the matter and submitted that the reference to DVO has rightly been made by the AO after rejection of the books of accounts and the additions have been correctly determined by the ld CIT(A).
4. Firstly, regarding the contention of the ld AR regarding reference to DVO under section 142(2A) as the said provisions does not provide any power for the ld. AO to made any reference to the DVO. It is noted from the report of the DVO available on record that the DVO has received the reference from the Assessing officer under section 142A(1) of the Act vide letter no. 1036 dated 13.01.2014. Further, the assessee has attended to the valuation proceedings and present through its AR at the time of physical inspection of the hotel property and submitted the necessary details as called for by the DVO. Given the above, it seems that the noting in the assessment order of section 142(2A) instead of section 142A is a mere typographical error and merely on account of such typographical error, it cannot be read as taking away the Assessing officer's powers to refer the matter to DVO under section 142A of the Act especially when DVO's report doesn't support the same. In 3 ITA No. 738/JP/15 M/s Hotel Surya Vilas Palace Vs. ACIT, Alwar.
light of the same, the said contention of the ld AR is devoid of any merit and cannot be accepted.
5. We now refer to the second contention of the ld AR that the ld. AO neither examined the books of accounts of the assessee nor rejected the books of account before making any reference to the DVO. In this regard, we refer to the decision of the Coordinate Bench in case of Prithavi Raj Bohra Vs. ITO (supra) wherein the issue under consideration was whether the AO was justified in referring the matter to DVO u/s 142A. It was held by the Coordinate Bench that as no books of account were rejected before referring the matter to DVO u/s 142A, the AO was not justified in making any addition in view of the report given by the DVO. The relevant findings are contained at para 2.2, 2.4 and 2.6 of its order which are reproduced as under:-
"2.2 In this case, the proceedings under section 147/148 were taken. Before completion of the assessment, the AO referred the matter to the DVO in view of section 142A of the Act. Thereafter the assessment was completed and various additions were made. The assessee preferred an appeal before the learned CIT(A) challenging the reopening of the assessment, referring the matter to the DVO under section 142A and sustaining the addition of Rs. 5,07,021/- made by the AO on account of cost of construction of the building in the name of Prithvi Plaza. The learned CIT(A) rejected all the grounds of the assessee and upheld the order of the AO.
2.4 Regarding ground No. 2 i.e., against upholding the action of the AO in referring the matter to the DVO under section 142A, it was submitted by the learned Authorised Representative that the learned CIT(A) has committed a mistake in not following the order of the Hon'ble jurisdictional High Court in the case of CIT v. Pratapsingh Amrosingh Rajendra Singh & Deepak Kumar (1993) 200 ITR 788 ( Raj) and in the case of CIT v. Hotel Joshi (200) 242 ITR 478 ( Raj) as the learned CIT(A) has followed the decision of Hon'ble Uttaranchal High Court in the case of CIT & Anr. V. Bhawani Shankar Vyas (2009) 311 ITR 8 (Uttarakhand). It was further submitted that in fact no books of account were rejected before referring the matter to the DVO under 4 ITA No. 738/JP/15 M/s Hotel Surya Vilas Palace Vs. ACIT, Alwar.
section 142A of the Act. It was further submitted that the decision of Hon'ble High Court has been reversed by the Hon'ble Supreme Court in the case of Sargam Cinema v. CIT (2010) 328 ITR 513 (SC). The copy of the order was also filed. Accordingly, it was submitted that the order of the AO is liable to be quashed on this ground alone.
2.6 After consider the orders of the AO, learned CIT(A) and the submissions of the learned counsel of the assessee, we are of the view that the assessee deserves to succeed in his legal ground. The Hon'ble Supreme Court in the case of Sargam Cinema v. CIT (Supra) while reversing the order of the Hon'ble High Court has held "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 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 Hon'ble High court. In the circumstances, the reliance placed on the report of the DVO was misconceived". By observing these observations, the decision of Hon'ble High Court was set aside and the order passed by the Tribunal was restored by the Honble Apex Court. The facts in the present case are similar as in this case also no books of account were rejected before referring the matter under section 142A of the Act. The learned CIT(A) has ignored the decision of Hon'ble jurisdictional High Court which was binding in nature. However, he has considered the decision of Hon'ble Uttaranchal High Court which has been reversed now by the Hon'ble Supreme Court. In view of these facts and circumstances of the case, we hold that the AO was not justified in making any addition in view of the report given by the DVO and therefore, the appeal on this issue is allowed and the addition so made is deleted."
5.1 It is noted that the Coordinate Bench has relied on the decisions of Hon'ble jurisdictional High Court in case of Pratapsingh Amrosingh Rajendra Singh & Deepak Kumar (supra) and Hotel Joshi (supra). These decisions have been rendered prior to the amendment brought in the Income Tax Act by virtue of which section 142A was introduced by the Finance Act, 2004. Hence, 5 ITA No. 738/JP/15 M/s Hotel Surya Vilas Palace Vs. ACIT, Alwar.
to this extent the decisions of the jurisdictional High Court do not support the case of the assessee in the instant case.
5.2. We now refer to the decision of Hon'ble Supreme Court in case of Sargam Cinema (supra) which has considered the provisions of section 142A of the Act and has held as under:-
"In the present case, we find that the Tribunal decided the matter rightly in favour of the assessee inasmuch 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."
5.3. Following the Hon'ble Supreme Court decision in case of Sargam Cinema, the Hon'ble Punjab & Haryana High Court in case of Dr. Raghuvendra Singh v. CIT [2014] 49 taxmann.com 544, taking into consideration of the provisions of Section 142A of the Act and circular No.5 of 2005, issued by the Central Board of Direct Taxes, has held that without rejecting the books of account, the matter should not be referred to the DVO. Relevant observation reads as under:
"13. Section 142A of the Act has been incorporated primarily for verification of the value of any investment in respect of cases enumerated therein. The Assessing Officer would not be justified in invoking the aforesaid provision in every case and in a routine manner. Where the assessee maintains regular books of account for the purpose of construction of the asset and produces 6 ITA No. 738/JP/15 M/s Hotel Surya Vilas Palace Vs. ACIT, Alwar.
the vouchers, it would not be appropriate for the Assessing Officer to refer the matter to the DVO without first rejecting the books of account by prima facie concluding that the valuation appears to be more than what has been depicted in the books of account. However, wherever the assessee has not maintained the regular books of account of cost of construction of the asset and claims its valuation on the basis of estimate of the report of the registered valuer, the Assessing Officer is empowered to make a reference to the DVO after forming a prima facie opinion that the value of the investment is not genuinely disclosed and is required to be assessed for the purposes of Sections 69, 69A or 69B of the Act. In other words, Section 142A of the Act, thus, cannot be invoked where valuation of the cost of construction is bonafide and based on books of account which has not been rejected. The report of the DVO would be dealt with by the Assessing Officer under sub section (3) of Section 142A of the Act. There is logic and reasoning for adopting the aforesaid view. There appears to be no occasion for the revenue not to accept the valuation of the cost of construction of an asset without rejecting the books of account maintained by the assessee. It would not only be unfair but against the public policy as well to assume that the assessee is dishonest and he must have submitted an incorrect account of expenses/investment."
5.4 Further, during the course of hearing, our attention was drawn to the provisions of section 142A. It is noted that an amendment has been brought in section 142A by the Finance Act 2014 w.e.f. 01.10.2014 wherein it is specifically provided that the Assessing Officer may make reference to the Valuation Officer whether or not he is satisfied about the correctness or completeness of the accounts of the assessee. The said amendment is prospective in nature and does not apply to the assessment order dated 29.03.2014 passed for the year under consideration. At the same time, it 7 ITA No. 738/JP/15 M/s Hotel Surya Vilas Palace Vs. ACIT, Alwar.
highlights the legal position which was prevalent prior to the amendment as laid down by the Hon'ble Supreme Court in case Sargam Cinema (supra) that the assessee authority could not have referred the matter to DVO prior to rejection of the books of accounts. It appears that the said amended has been brought in to overcome the decision rendered by the Hon'ble Supreme Court in case of Sargam Cinema (supra). The fact remains that the legal proposition as laid down by the Hon'ble Supreme Court in case of Sargam Cinema applies for the matter under consideration.
5.5 What therefore has to be examined in the instant case is whether the AO has rejected the books of accounts before reference was made to the DVO. In this regard, the ld. AR has drawn our reference to the noting of the Assessing Officer in the order sheet and submitted that reference was made to the DVO on 13.01.2014 and prior to that date, there is no mention in the order sheet that the AO either examined the books of accounts of the assessee or rejected the books of accounts before making any reference to the DVO. Per contra, the ld DR has drawn our reference to the assessment order dated 29.3.2014 and submitted that on perusal of the assessment order, it is clear that the books of accounts have been rejected u/s 145(3) and thereafter, the reference was made to the DVO.
5.5 On perusal of the note sheet of the assessment proceedings, we find that the same does not represent a clear sequence of events and proceedings leading to the production of the books of accounts, its examination and rejection thereof, reference to DVO and finally completion of the assessment proceedings. There is no mention of reference to the DVO as well as there is no mention of rejection of books of accounts of the assessee company though the assessment order talks about the rejection of books of account. The ld. CIT(A) has taken note of the assessee's said contention however we find that 8 ITA No. 738/JP/15 M/s Hotel Surya Vilas Palace Vs. ACIT, Alwar.
there is no finding recorded by the ld. CIT(A) in terms of rejection of books of accounts before a reference was made to the DVO u/s 142A of the Act. In absence of sufficient material available on record, we set aside the matter to file of the ld. CIT(A) to examine the said contention of the ld. AR afresh in light of above decision the Hon'ble Supreme court in case of Sargam Cinema (supra) and Dr. Raghuvendra Singh (supra).
6. Since we set aside the matter relating to the reference to the DVO to the file of the ld CIT(A), the other two grounds relating to rejection of books of accounts and confirming the addition of Rs. 3,02,977/- are also set aside to the file of the ld. CIT(A) to examine the same afresh.
In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 14/06/2017.
Sd/- Sd/-
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(Kul Bharat) (Vikram Singh Yadav)
U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member
Santosh*
Jaipur
Dated:- 14/06/2017
vkns'k dh izfrfyfi vxzfs "kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- M/s Hotel Surya Vilas Palace, Vill. Jatoli Ghana, NH-11 Agra Road, Bharatpur.
2. izR;FkhZ@ The Respondent- ACIT, Circle, Bharatpur.
3. vk;dj vk;qDr@ CIT
4. vk;dj vk;qDr¼vihy½@The CIT(A)
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT,
6. xkMZ QkbZy@ Guard File (ITA No.738/JP/2015) 9 ITA No. 738/JP/15 M/s Hotel Surya Vilas Palace Vs. ACIT, Alwar.
vkns'kkuqlkj@ By order, lgk;d iathdkj@ Assistant Registrar.
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