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Income Tax Appellate Tribunal, JABALPUR BENCH, JABALPUR
Before: SHRI A. D. JAIN & SHRI T. S. KAPOOR
IN THE INCOME TAX APPELLATE TRIBUNAL JABALPUR BENCH, JABALPUR BEFORE SHRI A. D. JAIN, VICE PRESIDENT AND SHRI T. S. KAPOOR, ACCOUNTANT MEMBER ITA No.175 & 176/JAB/2018 Assessment Year:2010-11 & 2011-12 Sunil Kumar Jain v. Income Tax Officer Prop. Mahaveer Machinery Stores Damoh Maganj Ward No.2 Station Chowk, Damoh TAN/PAN:AEQPJ2028F (Appellant) (Respondent) Appellant by: Shri Vijay Gupta, C.A. Respondent by: Shri P. D. Moughale, D.R. Date of hearing: 04 04 2019 Date of pronouncement: 04 04 2019 O R D E R PER A. D. JAIN, V.P.: These are assessee’s appeals against the orders of the ld. CIT(A)-1, Jabalpur, dated 28/6/2018 and 20/6/2018, for the Assessment Years 2010-11 and 2011-12 respectively. 2. The common grounds raised are as follows:- 1. Considering the fact that the reassessment proceeding was initiated by the Id AO solely on the basis of valuation report of Id DVO hence in view of Hon'ble Supreme Court decision in the case of ACIT v Dhariya Construction Co. (2010) 328 ITR 515, the Id CIT (A) ought to have held that the reopening of the assessment is bad in law and consequently the reassessment order dated 23/12/2013 is also bad in law. 2. In the facts and circumstances of the case the Id CIT (A) should have held that reopening of the assessment is bad in law.
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Considering the fact that addition of Rs.2,40,580/- for assessment year 2010-11 and Rs.48,120/- for assessment year 2011-12, on account of difference in cost of construction, was made by the Id AO solely on the basis of valuation report of Id DVO hence the Id CIT(A) should not have sustained the addition of Rs.1,68,406/- made on account of understatement of cost of construction of building. 4. On the facts and in the circumstances of the case Id CIT(A) was not justified in confirming addition of Rs.1,68,406/- for assessment year 2010-11 and Rs.33,684/- for assessment year 2011-12, made by the Id A.O. on the basis of valuation report of Id DVO. 5. On the facts and in the circumstances of the case Id CIT(A) was not justified in confirming disallowance of Rs.3,000/- for assessment year 2010-11 and Rs.5,000/- for assessment year 2011-12, made by the Id AO on ad hoc basis out of expenses debited in profit and loss account. 6. The CIT (A) order dated 28.06.2018 is bad in law hence may kindly be cancelled.
Apropos ground No.1, the ld. A.R. of the assessee has referred to APB-1, which is a copy of the notice issued u/s. 148 of the Act, on 9/4/2013. It has been contended that as evident from the reasons recorded by the A.O., the valuation report of the DVO is the sole reason for reopening of the completed assessments, in direct contravention of the decision of the Hon'ble Supreme Court in ‘ACIT vs. Dhariya Construction Co.’ (2010) 328 ITR 515 (SC). 4. The grievance of the assessee for both the years is found to be correct. The following are the reasons recorded for the assessment year 2010-11:
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From the above reasons, it is clear that the A.O. stated that from the DVO’s report, he noticed that the assessee had shown less cost of construction and that this was the reason of the A.O. to believe escapement of income. 6. In ‘ACIT vs. Dhariya Construction Co.’ (supra), the Hon'ble Supreme Court has held, as follows:
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“Opinion of the DVO per se is not an information for the purposes of reopening assessment u/s. 147. The A.O. has to apply his mind to the information, if any, collected and must form a belief thereon. Therefore, Department was not entitled to reopen the assessment on the basis of the opinion of the DVO.” 7. Evidently, the reasons recorded by the A.O. to form belief of escapement of income for both the years under consideration are in direct violation of the decision of the Hon'ble Supreme Court in ‘ACIT vs. Dhariya Construction Co.’ (supra). Therefore, these reasons are not valid reasons in the eye of law. They are, accordingly, quashed for both the years. As such, nothing pursuant to these reasons recorded survives for adjudication. That being so, all the proceedings pursuant to the reasons recorded by the A.O. for both the years under consideration, culminating in both the impugned orders, are quashed. Nothing else survives for adjudication, nor was anything else argued. 8. In the result, both the appeals are allowed. Order pronounced in the open Court on 04/04/2019.
Sd/- Sd/- [T. S. KAPOOR] [A. D. JAIN] ACCOUNTANT MEMBER VICE PRESIDENT DATED:04/04/2019 JJ:0404 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR