Income Tax Appellate Tribunal - Chandigarh
Sh. Sukhdev Singh L/H Of Late Smt. Suman ... vs Assessee on 31 May, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
CHANDIGARH BENCHES 'B' CHANDIGARH
BEFORE Ms. SUSHMA CHOWLA, JUDICIAL MEMBER
AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER
ITA No.1016 to 1019/Chd/2011
Assessment Years: 2001-02, 2002-03, 2004-05 & 2005-06
Sukhdev Singh L/H of V. I.T.O. Bilaspur (HP)
late Smt. Suman Sharma
Civil Hospital
Bilaspur
ADYPS 3878 F
(Appellant) (Respondent)
Assessee By : Shri Tej Mohan Singh
Department by: Shri Akhilesh Gupta
Date of hearing: 31.05.2012
Date of pronouncement: 07.06.2012
ORDER
PER SUSHMA CHOWLA, JM
These four appeals filed by the same assessee are against the consolidated order of CIT(A), Shimla dated 23.8.2011 relating to Assessment Years 2001-02, 2002-03, 2004-05 and 2005-06 against the order passed u/s 143(3) of Income Tax Act( in short 'the Act').
2. All these appeals were heard together and are being disposed off by this consolidated order. The facts in all the captioned assessment years are identical. However, reference is being made to the facts in ITA No.1016/Chd/2011 for adjudicating the issue.
3. The preliminary issue raised by the assessee in all the captioned a s s e s s m e n t ye a r s i s v i d e g r o u n d N o . 1 w h i c h r e a d s a s u n d e r :
"1 That in the facts and circumstances of the case, the ld. CIT(A) has erred both in law and facts that the re-assessment proceedings were initiated u/s 148 on the basis of survey u/s133-A and not on the basis of valuation report of the DVO."2
4. The brief facts of the case are that survey under section 133A of the Act on 3.12.2003 was carried out at the business premises of Shri Sukhdev Singh at Beri. The statement of Shri Sukhdev Singh Proprietor was recorded in which he stated that the premises where this concern was operating from belonged to his wife Smt.Suman Sharma to whom he w a y p a yi n g r e n t o f R s . 6 0 0 0 / - p e r m o n t h . The statement of Smt.Suman Sharma was also recorded, in which she admitted to have received rent of Rs.6000/- per month from sole proprietary concern of her husband and Rs.2500 per month from one M/s Mani Majra Engg. As per the assessee, t h e p r o p e r t y w a s g i v e n o n r e n t a b o u t o n e a n d h a l f ye a r b a c k f r o m t h e d a t e o f s u r v e y. The assessee was working as a nurse in Government H o s p i t a l a t t h e t i m e o f s u r v e y. During the course of assessment p r o c e e d i n g s r e l a t i n g t o a s s e s s m e n t ye a r 2 0 0 3 - 0 4 , t h e a s s e s s e e s u b m i t t e d that she had spent Rs.5,94,000/- on the construction of the house during t h e f i n a n c i a l ye a r 2 0 0 0 - 0 1 . The Assessing Officer referred valuation of the building to the Valuation Officer under section 142A of for determining the cost of construction. The DVO inspected the property on 11.12.2004 and determined the cost of construction at Rs.44,07,000/-. The assessee had submitted a report of the Registered Valuer who had determined the cost of construction up to October, 2004 at Rs.23,14,529/-. In view of the difference of the cost in construction shown by the assessee as compared to the report of the DVO, the Assessing Officer recorded reasons for reopening assessment and notice u n d e r s e c t i o n 1 4 8 o f t h e A c t d a t e d 3 0 . 3 . 2 0 0 6 f o r a s s e s s m e n t ye a r 2 0 0 1 - 02 was issued and served upon the assessee on 31.3.2006. In response the assessee furnished return of income declaring income from salary at Rs.1,13,750/-. In the course of re-assessment proceedings the learned 3 A.R. for the assessee pointed out that notice issued under section 148 of the Act was not valid as it was not issued in the proper format. The objection of the learned A.R. for the assessee was not accepted by the Assessing Officer as the assessee had filed return of income in compliance to the notice under section 148 of the Act. The learned A.R. for the assessee beside objecting to the determination of valuation by the DVO requested that the DVO be called in order to enable the valuer of the assessee to have discussion with regard to the valuation made of the p r o p e r t y. T h e A s s e s s i n g O f f i c e r r e j e c t e d t h e p l e a o f t h e a s s e s s e e a s t h e comments of the DVO on the objections raised by the assessee on the value of the property had already been forwarded to the assessee. The Assessing Officer rejecting the explanation of the assessee and in view of the report of the DVO who had determined the cost of construction d u r i n g t h e f i n a n c i a l ye a r 2 0 0 0 - 0 1 a t R s . 1 0 , 0 3 , 5 4 9 / - , a f t e r a l l o w i n g rebate on account of self supervision, determined the cost of construction at Rs.9,78,460/- against which the assessee had spent Rs.5,94,000/- only. The difference of Rs.3,84,460/- was added to the income of the assessee as the income from other sources. Further addition of Rs.2,80,305/- was made under section 68 of the Act and Rs.90,000/- on account of unexplained gift.
5. In appeal before the CIT (Appeals) the assessee challenged proceedings initiated on the basis of notice issued under section 148 of the Act. The assessee raised the objection both against the notice issued under section 148 being not in the proper format and proceedings initiated being bad in law. The CIT (Appeals) observed that notice issued under section 148 of the Act was valid as the non-statutory format in which the same was issued was a technical breach and such mistakes/defects were curable under section 292B of the Act, specially 4 where it is not the case of the assessee that the reasons were not recorded for reopening of assessment. In respect of second aspect raised b y the learned A.R. for the assessee, it was held b y the CIT (Appeals) as follows:
"The judgements cited by the appellant regarding initiation of proceedings u/s 147 only on the basis of DVO's report are not related to the facts of the present case as in the case of the appellant, survey u/s 133A was conducted where statements of appellant and her husband were recorded on the basis of evidence gathered during such survey. In view of the same there is no merit in these grounds of appeal and the same are dismissed."
6. The assessee by way of preliminary objection has raised the issue of initiation of the proceedings under section 148 of the Act. The learned A.R. for the assessee pointed out that survey on 3.12.2003 was conducted at the premises of the husband of the assessee, who was c a r r yi n g o n t h e b u s i n e s s a s a s o l e p r o p r i e t o r . The assessee was a nurse in a Government Hospital. The learned A.R. for the assessee admitted that when the survey was going on at the business premises of the husband of the assessee, the statement of the assessee was recorded, which is placed at pages 1 and 2 of the Paper Book. The learned A.R. for the assessee further brought to our notice that after the demise of the assessee, the present proceedings are being conducted by the husband of the assessee as legal heir. Our attention was drawn to the reasons recorded for reopening of the assessment for the captioned assessment years placed at pages 3 to 6 of the Paper Book. The learned A.R. for the assessee stressed that nothing incriminating was found during the course of survey which indicated that the assessee had made investment in the construction of the property over and above her known sources of income. The learned A.R. for the assessee fairly conceded that the 5 assessee is not aggrieved by the format before us, but is aggrieved by the finding of the CIT (Appeals) in the later part of para 4.1. The learned A.R. for the assessee further referred to the objections filed before the Assessing Officer during the course of assessment proceedings itself wherein it was pointed out that the assessment could not be reopened on the basis of report of the DVO. Copy of the said letter is placed at page 7 of the Paper Book. The learned A.R. for the assessee fairly conceded that the said letter was for the assessment p r o c e e d i n g s r e l a t i n g t o a s s e s s m e n t ye a r s 2 0 0 2 - 0 3 , 2 0 0 4 - 0 5 a n d 2 0 0 5 - 0 6 a n d n o s u c h l e t t e r w a s f o r w a r d e d f o r a s s e s s m e n t ye a r 2 0 0 1 - 0 2 , b u t t h e i s s u e w a s i d e n t i c a l i n a l l t h e a s s e s s m e n t ye a r s . T h e l e a r n e d A . R . f o r t h e assessee, however, submitted that in view of the ratio laid down by the H o n ' b l e S u p r e m e C o u r t i n A C I T V s . D h a r i ya C o n s t r u c t i o n s C o . [ 3 2 8 I T R 515 (SC)] and in ITO Vs. Shree Ram Verma [(2010) 134 TTJ (Lucknow)(UO)73], the re-assessment proceedings initiated were bad in law.
7. The learned D.R. for the Revenue pointed out that no said issue was raised before the CIT (Appeals) and also submitted that the issue stands covered by the ratio laid down by the Hon'ble Supreme Court in ACIT Vs. Rajesh Jhaveri Stock Brokers P. Ltd.[291 ITR 500(SC)].
8. In rejoinder the learned A.R. for the assessee referred to the written submissions filed before the CIT (Appeals) placed at pages 9 to 15 of the Paper Book in which additional ground No.7 has been raised by the assessee vis-à-vis the jurisdiction of the Assessing Officer to issue the impugned notice under section 148 solely on the basis of the valuation officer report.
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9. We have heard the rival contentions and perused the record. The issue arising before us is in relation to initiation of re-assessment proceedings under section 147/148 of the Act. In the facts of the c a p t i o n e d a s s e s s m e n t ye a r s b e f o r e u s , r e - a s s e s s m e n t p r o c e e d i n g s w e r e initiated in the case of the assessee pursuant to the report of the DVO in respect of construction of the building by the assessee.
10. Survey under section 133A of the Act was carried out at the business premises of the husband of the assessee on 3.12.2003. The assessee before us is the wife of the person in whose premises the survey was conducted. The assessee has no connection with the business carried on by her husband and was working as a nurse in civil hospital. The premises from where the said business was being carried on was owned by the assessee and she was in receipt of rent of the said premise from her husband. On the date of survey beside the statement of the husband of the assessee, statement of the assessee has also recorded in which she admitted that the building belonged to her and she was receiving rent for the said building both from her husband and another t e n a n t f o r t h e p a s t m o r e t h a n o n e a n d h a l f ye a r s . N o t h i n g i n c r i m i n a t i n g against the assessee was found during the course of survey conducted at the business premises of the husband of the assessee. The assessee was requisitioned to furnish the amount invested in the cost of construction of the building and the sources thereof. The Assessing Officer also referred the matter of valuation of the cost of construction of the building to the DVO under section 142A of the Act. The assessee had filed the report of Registered Valuer and there was variation in the fair market value estimated by the Registered Valuer on behalf of the assessee and fair market value estimated by the DVO. The assessee had c o n s t r u c t e d t h e b u i l d i n g w . e . f . f i n a n c i a l ye a r 2 0 0 0 - 0 1 a n d i n v i e w o f t h e 7 report of the DVO, received during the pendency of assessment p r o c e e d i n g s r e l a t i n g t o a s s e s s m e n t ye a r 2 0 0 3 - 0 4 , t h e A s s e s s i n g O f f i c e r recorded reasons for issuance of notice under section 147/148 of the Act. C o p i e s o f t h e r e a s o n s r e c o r d e d f o r a s s e s s m e n t ye a r 2 0 0 1 - 0 2 are placed at page 3 of the Paper Book in which the Assessing Officer noted that the assessee had spent Rs.26,08,500/- on the cost of construction of the house property during the financial years 2000-01 to 2004-05, against which the DVO had determined the cost of construction at Rs.54.07 lacs. T h e A s s e s s i n g O f f i c e r t a b u l a t e d t h e c o s t o f c o n s t r u c t i o n ye a r - w i s e i . e . as shown by the assessee and as determined by the Valuation Officer in t h e f i n a n c i a l ye a r s 2 0 0 0 - 0 1 t o 2 0 0 4 - 0 5 a n d i n t o t a l t h e r e w a s a d i f f e r e n c e of Rs.17,99,500/- between the report of the Registered Valuer and that of the DVO. In view thereof, the Assessing Officer had reason to believe t h a t t h e i n c o m e t o t h e e x t e n t o f R s . 4 , 0 9 , 5 4 9 / - i n a s s e s s m e n t ye a r 2 0 0 1 - 02 had escaped assessment within the meaning of section 148 r.w.s. 147 of the Act and consequently notice u/s 148 of the Act was issued. The perusal of the reasons recorded for reopening the assessment under section 147/148 of the Act reflects that the basis for reopening the assessment is the report of the DVO which was on the higher side as compared to the report of the Registered Valuer in relation to the cost of construction of the property owned by the assessee.
11. Similar issue of reopening the assessment under section 147 of the Act on the basis of Valuation Report of DVO arose before the Apex Court. The Hon'ble Supreme Court in ACIT Vs. Dhari ya Constructions Co. (supra) have held as under:
"The opinion of the DVO per se is not an information for the purposes of reopening assessment under section 147 of the Income Tax Act, 1961. The Assessing Officer has to apply his mind to the 8 information, if any, collected and must form a belief thereon."
12. Further the Lucknow Bench in ITO Vs. Shree Ram Verma (supra) have also followed the principle laid down by the Hon'ble Supreme Court in ACIT Vs. Dhariya Constructions Co. (supra) and held that "Report of DVO as regards cost of construction cannot constitute material for reason to belief that income has escaped assessment".
13. In the facts and circumstances of the present case before us the reasons for reopening of assessment in the captioned assessment years was the report of the DVO and in the absence of any information or incriminating document found during the course of assessment proceedings, we find no merit in the exercise of power by the Assessing Officer under section 147/148 of the Act. Following the ratio laid down by the Hon'ble Supreme Court in ACIT Vs. Dhari ya Constructions Co. (supra) and by the Lucknow Bench in ITO Vs. Shree Ram Verma (supra), we hold that the opinion of the DVO in relation to the cost of construction of the building owned by the assessee, in the absence of any other information collected against the assessee is not an information and reopening of assessment by way of proceedings under section 147/148 of the Act are invalid and are hereby cancelled. Consequentl y, the assessment order passed under section 143(3) r.w.s. 147 of the Act is hereby cancelled. In view of our canceling the assessment framed in the hands of the assessee we do not address the various other issues raised by the assessee against the merits of addition. Ground No.1 raised by the assessee is allowed.
14. The facts and the issues arising in ITA Nos.1017 to 1019/Chd/2011 are similar to the facts and issues in ITA No.1016/Chd/2011 and out decision in 9 ITA No.1016/Chd/2011 shall appl y mutatis mutandis to ITA Nos.1017 to 1019/Chd/2011. The ground of appeal No.1 raised by the assessee is allowed.
15. I n t h e r e s u l t , a l l t h e f o u r a p p e a l s r e l a t i n g t o a s s e s s m e n t ye a r s 2001-02, 2002-03, 2004-05 & to 2005-06 filed by the assessee are allowed.
Order pronounced in the open court on this 7th day of June, 2012.
Sd/- Sd/- (MEHAR SINGH) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated 7 t h June, 2012 *Rati*
Copy to: The Appellant/The Respondent/The CIT(A)/The CIT/The DR.
Assistant Registrar, ITAT, Chandigarh 10