M/S. GDM ASSOCIATES,PURBA MEDINIPUR vs. ITO, WARD 27(2), HALDIA, PURBA MEDINIPUR

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ITA 592/KOL/2017Status: DisposedITAT Kolkata26 December 2018AY 2009-103 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that a DVO's report alone is not sufficient for re-opening an assessment under Section 147/148. The Assessing Officer must independently apply their mind to form a belief of income escaping assessment.

What were the facts?

The assessee's regular assessment was completed, but later re-opened based on a DVO's report alleging differences in construction cost. The assessee argued that the re-opening was invalid as the Assessing Officer did not independently apply their mind to the DVO's report.

What were the issues?

Whether the re-opening of assessment based solely on a DVO's report, without independent application of mind by the Assessing Officer, is valid.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 147,Section 148

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(1)Show list

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Income Tax Appellate Tribunal, KOLKATA BENCH “B” KOLKATA

Before: Shri S.S.Godara & Shri, M. Balaganesh

आदेश /O R D E R PER M.Balaganesh Accountant Member:- This assessee’s appeal for assessment year 2009-10 arises against the Commissioner of Income Tax (Appeals)-7, Kolkata’s order dated 06.05.2016 passed in case No.601/CIT(A)-7/Wd.27(2)/14-15 involving proceedings u/s 143(3)/r.w.s. 147 of the Income Tax Act, 1961; in short ‘the Act’.

Heard both the parties. Case file perused.

2.

The assessee pleads two substantive grounds in its instant appeal. Its former grievance challenges validity of the re-opening / re-assessment as upheld in the course of lower appellate proceedings. It thereafter avers that A.Y. 2009-10 M/s GDM Associates vs. ITO Wd-27(2) Haldia Page 2 the Assessing Officer as well as CIT(A) have erred in law as well as on facts in making estimated cost of construction addition of ₹63,08,735/- as unexplained investment.

3.

We come to former legal issue first of all. There is no dispute about the Assessing Officer having completed the regular assessment in issue on 03.12.2011. Relevant assessment order to this effect reads that the assessee had filed all relevant bills, vouchers and documents for verification of its expenditures items. The Assessing Officer thereafter formed reasons to believe that assessee’s income liable to be taxed had escaped assessment. There is no dispute that it was the DVO’s report alleging some difference in cost of construction which set the impugned re-opening in motion. The Assessing Officer thereafter issued sec. 148 notice dated 29.08.2012 and framed the impugned re-assessment on29.03.2014 adding the alleged difference in cost of construction amounting to ₹71,22,750/- as upheld in the course of lower appellate proceedings.

4.

Learned counsel representing assessee vehemently contends during the course of hearing that the Assessing Officer has erred in law as well as on facts in re-opening the above regular assessment based on DVO’s opinion. The Revenue’s case on the other hand is that the said DVO’s report had not come during the course of assessment and therefore, the Assessing Officer had rightly initiated re-opening proceedings as per law. We notice in this backdrop of these pleadings that hon'ble apex court’s decision in ACIT vs. Dhariya Construction Co. (2011) 197 Taxman 202 (SC) has settled the law that a DVO’s report per se is not an information for the purpose of re-opening an assessment u/s 147 r.w.s. 148 of the Act. Their lordships concluded that an Assessing Officer has to necessarily apply his mind on such an information collected finally culminating in the belief of escapement of taxable income from being assessed. No such material emerges from the case file indicating the Assessing Officer to have formed his belief on the DVO’s report in issue.

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