COMMISSIONER OF INCOME TAX-I AMRITSAR vs. RAJESH MAHAJAN

ITA/371/2013HC Punjab & HaryanaPHHC01105243201314 July 2014Author: MR. JUSTICE SURINDER GUPTA,MR. JUSTICE RAJAN GUPTA8 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that no substantial question of law arose from the ITAT's order and dismissed the revenue's appeal. The Court agreed with the ITAT's reasoning that the AO could not refer the matter to the DVO under Section 142A without first rejecting the assessee's books of account. The ITAT's finding that the AO had not applied his mind to the correctness or completeness of the accounts and had not recorded any dissatisfaction as required by Section 145(3) was upheld. The Court also noted that the ITAT had considered the merits of the valuation report, finding that the DVO's valuation was flawed in several aspects, including the use of higher rates, incorrect classification of construction, and inadequate consideration of the assessee's objections and submitted evidence. The Court distinguished the revenue's cited case of Bharathi Cement Corporation P. Limited, finding the facts to be different. Therefore, the ITAT's deletion of the addition was affirmed.

What were the facts?

The Revenue (Commissioner of Income Tax I, Amritsar) appealed against an order of the Income Tax Appellate Tribunal (ITAT) which deleted an addition of ₹10,22,982 made by the Assessing Officer (AO) for Assessment Year 2008-09. The addition represented the difference between the cost of construction of a hotel building as determined by the Departmental Valuation Officer (DVO) and the cost declared by the assessee, Shri Rajesh Mahajan. The assessee had initially furnished a valuation report from an approved valuer. The AO, after obtaining instructions from the Additional CIT, referred the matter to the DVO under Section 142A of the Income Tax Act, 1961, and subsequently rejected the assessee's books of account under Section 145(3) to make the addition. The CIT(A) had dismissed the assessee's appeal, but the ITAT allowed it, relying on the Supreme Court's decision in Sargam Cinema vs. CIT, holding that the AO could not refer the matter to the DVO without first rejecting the books of account.

What were the issues?

1. Whether the Hon'ble ITAT was right in deleting the addition by relying on the decision of the Hon'ble Supreme Court in Sargam Cinema vs. CIT, ignoring that the AO had rejected the books of account after referring the case to the DVO for valuation during the assessment proceedings for the assessment year 2006-07? (Question of law turning on Section 142A and Section 145(3)). 2. Whether the Hon'ble ITAT was right in deleting the addition on merits by ignoring that all objections to the Valuation Report raised by the assessee were properly dealt with and replied to by the DVO? (Question of mixed law and fact). 3. Whether, in the facts and circumstances of the case, the order passed by the Hon'ble ITAT was perverse being contrary to the material on record? (Question of law). Assessee's Contention (as per ITAT's reasoning): The AO could not have referred the matter to the DVO without first rejecting the books of account. The DVO's valuation was flawed, using higher CPWD rates, classifying 'C' class construction as 'A' class, not properly accounting for plinth and duct areas, and allowing insufficient credit for self-supervision and existing raw structure. The valuation report of the assessee's approved valuer was not considered. Revenue's Contention: The rejection of books of account was not a condition precedent for making an assessment under Section 142A(1). The AO rightly referred the matter to the DVO, whose valuation was significantly higher than the assessee's declared cost. The DVO had properly dealt with the assessee's objections.

Which sections of the Income-tax Act were involved?

Section 260A,Section 142A,Section 145(3),Section 69

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IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of decision: 14.7.2014 The Commissioner of Income Tax I, Amritsar ……Appellant Vs. Shri Rajesh Mahajan …..Respondent CORAM: HON’BLE MR. JUSTICE AJAY KUMAR MITTAL HON’BLE MR. JUSTICE JASPAL SINGH Present: Mr.Dinesh Goyal, Advocate for the appellant. Ajay Kumar Mittal,J.

1.

This order shall dispose of ITA Nos.371 to 373 of 2013 as according to the learned counsel for the appellant, the issue involved in all these cases is similar. However, the facts are being extracted from ITA No.371 of 2013. 2. ITA No.371 of 2013 has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (in short, “the Act”) against the order dated 23.5.2013, Annexure A.3 passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (in short, “the Tribunal') in ITA No.446 (Asr)/2012, for the assessment year 2008-09, claiming following substantial questions of law:- i) Whether the Hon’ble ITAT is right in deleting the addition by relying upon the decision of the Hon’ble 1 GURBAX SINGH 2014.08.30 10:37 I attest to the accuracy and integrity of this document High Co

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