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Income Tax Appellate Tribunal, HYDERABAD BENCHES “A” : HYDERABAD
Before: SHRI S.S.GODARA & SHRI LAXMI PRASAD SAHU
O R D E R PER S.S.GODARA, J.M. :
This Revenue’s appeal for AY.2014-15 arises from the CIT(A)-11, Hyderabad’s order dated 31-07-2019 passed in case No.11/10025/2018-19, in proceedings u/s.143(3) r.w.s.153A of the Income Tax Act, 1961 [in short, ‘the Act’]. Heard both the parties. Case file perused.
The Revenue’s has raised the following substantive grounds in the instant appeal:
1.The Ld.CIT(A) erred both in law and on facts of the case in allowing relief to the assessee. 2.The Ld.CIT(A) erred in relying on the case laws including the Hon'ble Supreme Court’s decision in the case of Sargam Cinema Vs. CIT (328 ITR 513) (2010) (SC) which was pronounced prior to 01.10.2014. After the amendment to section 142A of the Act the AO can make a reference to the Valuation Officer even without rejecting the books of account. 3.The Ld.CIT(A) failed to appreciate the fact that the provisions of section 142A have been amended w.e.f.01.10.2014 and as per sub- section (2) of section 142A of the Act, the AO can make a reference to the Valuation Officer whether or not he is satisfied about the correctness or completeness of the accounts of the assessee. 4.The appellant craves leave to amend or alter any ground or add any other grounds which may be necessary
Both the learned representatives next took us to the CIT(A)’s detailed discussion deciding the impugned issue of Section 142A applicability in assessee’s favour as under:
4.2 I have considered the assessment order and submissions of the appellant. The appellant filed Return of Income originally on 28.11.2014. The same was, it appears, processed u/s.143(1) and time limit for issuing notice u/s.143(2) has expired before the date of Search i.e 18.02.2016. The same has attained finality and was not abated due to Search being conducted. Accordingly, the addition in assessment u/s.153A can be made which are based on/emanate from the seized material. The AO has not relied on/discussed about any such material in the assessment order. Further, the appellant is admitting income estimated @11% on the sales for each year on the projects undertaken. The estimation has not been disturbed by the AO in the order nor any evidence was found during the course of Search which shows that the estimation was incorrect/inappropriate. The appellant, admittedly maintained books of account and vouchers, on which no adverse finding has been given by the AO. The books of account were not rejected by the AO. Making a reference to DVO for valuation without pointing out any defects/inadequacies in the accounts and without rejecting the books of account by the AO is not lawful as held in the decisions relied on by the appellant (supra). In view of the foregoing, the addition made by the AO is without the force of law and the same is unwarranted. Accordingly, the addition made by AO is directed to be deleted. The other grounds raised by the appellant are not adjudicated as they become inconsequential/ academic in view of the findings given above. The appellant succeeds on the above grounds
Mr.Chandra Sekhar vehemently contended during the course of hearing that the CIT(A) has erred in law and facts in reversing the Assessing Officer’s action invoking Section 142A of the Act without even taking note of the fact that the said authority could very well make the statutory reference to the DVO ‘whether or not he is satisfied about the correctness or completeness of the accounts of the assessee’ as per the legislative amendment to this effect vide Finance Act, 2014 w.e.f.01-10-2014. He therefore sought to revive the Assessing Officer’s action to this effect. Learned authorised representative has drawn a strong support from the CIT(A)’s foregoing detailed discussion.
We have given our thoughtful consideration to the foregoing rival submissions. It is not in dispute that we are in AY.2014-15. The department had carried out the search in assessee’s case on 18-02-2016 wherein its chairman Shri K.Murali Krishna got recorded his sworn statement on 03-03- 2016. We note from para-6, pg.3 of the assessment order dt.07-07-2018 that the Assessing Officer considered the said search statement allegedly admitting profit on estimation @11% in real estate development business and observed that ‘it was felt necessary and prudent in the interest of revenue, to get the value of investment made by the assessee in the project (i.e., cost of construction) estimated by the DVO’.
5.1. It is therefore clear in other words that the assessing authority had gone by the assessee’s chairman’s search statement/alleged admission without even considering the assessee’s books of account. We deem it appropriate at this stage to quote the CBDT’s twin circular(s) dt.10-03-2003 and 18-12-2014 that such admission(s) made during the course of a search do not hold any significance. When we apply these twin circulars to the facts of the instant case, it is evident that the Assessing Officer had proceeded to invoke his Section 142A reference jurisdiction on a search statement which is not even admissible in any law. The other aspect therefore as to whether or not the assessee’s books were “complete or correct”; as the case may be, never arose at all. We therefore are of the opinion that the Assessing Officer’s action exercising his jurisdiction to invoke Section 142A reference on the basis of a totally non-admissible search statement and without even going through the assessee’s books, has been rightly overruled in the lower appellate proceedings.
This Revenue’s appeal is dismissed.