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Income Tax Appellate Tribunal, MUMBAI BENCHES “F”, MUMBAI
Before: Shri Joginder Singh, & Shri Ramit Kochar
Per Joginder Singh (Judicial Member) The Revenue is aggrieved by the impugned order dated 04/03/2013 of the ld. First Appellate Authority, Mumbai. The only ground raised in this appeal pertains to holding that reopening u/s 147 of the Income Tax Act, 1961(hereinafter the Act) is invalid by applying the ratio laid down by Hon’ble Apex Court in the case of Dhariya Construction Company.
2 Urmila Construction Company
During hearing of this appeal, We have heard, Shri B. Yadagiri, ld. DR, and Shri Vijay C. Kothari, ld. counsel for the assessee. The crux of arguments on behalf of the Revenue is that the assessee did not maintain properly the closing stock and the report of the DVO could not received by the Assessing Officer and further the assessee also did not co- operate with the department, therefore, addition was rightly made u/s 69 of the Act as huge difference was found. Our attention was also invited to note mentioned in the original assessment order dated 31/12/2007. It was contended that the ld. Commissioner of Income Tax (Appeals), therefore, is not justified in its decision.
2.1. On the other hand, the ld. counsel for the assessee place reliance upon the decision in 328 ITR 515 (SC) by contending that in original assessment order, the Assessing Officer has made reference to the DVO and the report from the DVO was not received, therefore, it was contended whether section 147 of the Act is a correct provision which can be invoked. It was asserted that the Assessing Officer has already formed a belief that value shown by the assessee is not correct, therefore, he sent for valuation to the DVO. Plea was also raised that the department would have done u/s 154 of the Act or under any other provisions but not u/s 147 of the Act. The ld. counsel explained that income escaping assessment is already with the Assessing Officer and he framed assessment by forming a belief, thus, it was not a valid reference. In reply, the ld. DR contended that the Assessing Officer used information and then formed a belief 3 Urmila Construction Company JCIT, by placing reliance upon the decision in Rajesh Jhaveri. The ld. counsel for the assessee contended that in the case of Rajesh Jhaveri, the facts are different as in the case of assessee, assessment was framed u/s 143(3) of the Act.
2.2. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee is in the business as a builder and developers declared nil income in its return filed on 29th October, 2005. The case of the assessee was selected for scrutiny. During the course of assessment proceeding it was noted by the Assessing Officer that the assessee has valued work in progress (hereinafter for short as WIP) at the end of the year at Rs.2,28,44,779/-. The assessee informed the Assessing Officer that due to certain disputes between the vendors of TDR and the assessee, the project is halted for almost ten years, therefore, no activity could be carried out at the site. It is noted that in the original assessment, completed u/s 143(3) of the Act (dated 31/12/2007) the Assessing Officer noticed certain defects which are enumerated as under:- i. Non maintenance or improper maintenance of records related to amenities. ii. Non maintenance or improper maintenance of records related to labour payments. iii. Non maintenance or improper maintenance of records related to tender/sub contractor payments.
4 Urmila Construction Company iv. Absence of period co-relation between disclosed labour charges, consumption of main building materials and receipt of installment of sale proceeds of flat. v. Non maintenance or improper maintenance of records related to work in progress. 2.3. The ld. Assessing Officer, in view of the above observation, referred the matter to the DVO, who did not submit the report till 31st December, 2007 and since the assessment was getting time barred, the assessment was framed u/s 143(3) by putting a note that the assessment is subject to rectification pending DVO report. Thereafter, on 18/01/2010, the Assessing Officer issued notice u/s 148 to which the assessee asked the reasons for reopening the completed assessment. The Assessing Officer vide communication dated 25/02/2010 informed the assessee that he has received the DVO report on 03/12/2009, wherein, the cost of construction, as on 31/03/2005, has been determined/opined at Rs.4.49 crore, therefore, he had reason to believe that income has escaped assessment to the extent of Rs.2.21 crore, which was proposed to be included u/s 69 of the Act as income of the assessee.
2.4. On appeal, before the ld. Commissioner of Income Tax (Appeals), the reopening was held to be invalid. The Revenue is aggrieved and is in appeal before this Tribunal.
2.5. If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, 5 Urmila Construction Company assertions made by the ld. respective counsel, if kept in juxtaposition and analyzed, the limited issue before us is with respect to validity of reopening of assessment on the basis of DVO’s report. This issue has been decided by Hon’ble Apex Court in the case of ACIT vs Dhariya Construction Company 328 ITR 515 (SC). The relevant portion of the same is reproduced hereunder:-
Having examined the record, we find that in this case, the department sought reopening of the assessee based on the opinion given by the District Valuation Officer (DVO). 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 information, if any, collected and must form a belief thereon. In the circumstances, there is no merit in the Civil Appeal. The department was not entitled to reopen the assessee. Civil appeal is, accordingly, dismissed. No order as to costs.
2.6. Thus, we find merit in the contention of the assessee. It is worth noting that the SLP of the department against the aforesaid order was dismissed by Hon’ble Apex Court in CIT vs Dharia Construction Company, SLP (C No.17990 of 2002 : (2002) 258 ITR (St.) 74 (SC). The ratio laid down by Hon’ble Allahabad High Court in CIT vs Vrindaban Real Estate (P.) Ltd. (IT Appeal Nos. 486 of 2008 and 344, 347 & 609 of 2011) order dated 24/07/2012, Jagat Jayantilal Parikh vs. DCIT) (2013) 355 ITR 400 (Guj-HC), Indian & Eastern Newspaper Society vs. CIT, (1979) 119 ITR 996 and 6 Urmila Construction Company CIT Vs Modipon Ltd., reported in 2011 334 ITR 106 supports the case of the assessee. The Hon’ble Calcutta High Court in the case of Satosh Kumar Dalmia (1994) 208 ITR 337 (Cal.) held that valuation report cannot by itself form the basis for reopening the assessment. In another case of Smt. Uma Devi Jhavar vs ITO 1994 Tax LR 78 (Cal.), the Hon’ble High Court held that valuation is always a question of opinion. Even after 01/04/1989, the concept of “change of opinion”, was not removed by the legislation. In the aforesaid case of Dharia Construction company, where department sought reopening of assessment based on the opinion given by the DVO, the Hon’ble Apex Court held that opinion of DVO, per se is not an information for the purposes of reopening of assessment u/s 147 of the Act. Thus, we find no merit in the appeal of the Revenue, consequently, dismissed.
Finally, the appeal of the Revenue is dismissed.
This Order was pronounced in the open court in the presence of ld. representatives from both sides at the conclusion of the hearing on 22/09/2015.