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Income Tax Appellate Tribunal, CUTTACK BENCH, CUTTACK
Before: SHRI C.M. GARG, JM & SHRI MANISH BORAD, AM
Per Bench: In the above captioned seven appeals, five appeals have been filed by two different assessees and two appeals have 2 IT(SS)A Nos.44/CTK/2018 IT(SS)A Nos.117-119/CTK/2018 IT(SS)A Nos.146&147/CTK/2018 & ITA No.382/CTK/2018 been filed by the department which are directed against the separate orders of CIT(A)-2, Bhubaneswar, all dated 31.01.2018 for the assessment years 2011-2012, 2012-2013, 2013-2014 & 2014-2015, respectively.
Grounds raised in the case of Mahesh Kumar Agrawal IT(SS)A Nos.117/CTK/2018 for A.Y. 2011-12 read as under :- 1) That the Ld. CIT(A) erred in not considering the fact that order u/s 153A, passed on 14.10.2016 was barred by limitation, since the assessment proceedings got time barred on 31.03.2016. The order passed on 14.10.2016 on the ground that it has referred for valuation u/s 142A of the I T. Act. The property was constructed between F.Y. 2006-07 to 2008-09 and the Valuation officer did not give any adverse finding. The said valuation offered u/s 142A is not based on any incriminating seized documents and the property constructed does not pertain to this year. Hence, passing the said order beyond due date allowed u/s 153B of the IT. Act is barred by limitation & void. The assessment order passed by the AO u/s 153/143(3) on 14.10.2016, being barred by limitation u/s 153B of the Act becomes invalid and needs to be quashed. 2) The Ld. CIT(A) erred in reducing the cash available for utilization in subsequent years, out of the income offered by the assessee for the AY 2011- 12 of RS.1,65,59,380/-, by Rs.1,05,08,330/- [ i.e Rs.90,00,000/- being payment to coal and other suppliers of M/s Bhaskar Steels & Ferro Alloys Ltd (Le in Short M/s Bhaskar Steels) and Rs.15,08,330/- to Geeta Rani Mohanty, a supplier of M/s Bhaskar Steels], as already explained that on cancellation of MOU with M/s Bhaskar Steel, the entire investment was returned back by the company and also confirmed this fact to the AO u/s 133(6) by the said company. Hence it is a mistake on the part of the Ld. CIT(A) is not appreciating the correct fact and wrongly reduced the amount received back by Rs. 1,05,08,330/- & balance carried to next year. 3) That the assessee craves to leave, add, alter, amend or withdraw any ground or grounds of appeal before or at the time of hearing.
3 IT(SS)A Nos.44/CTK/2018 IT(SS)A Nos.117-119/CTK/2018 IT(SS)A Nos.146&147/CTK/2018 & ITA No.382/CTK/2018 Grounds raised in the case of Mahesh Kumar Agrawal IT(SS)A Nos.118/CTK/2018 for A.Y. 2012-13 read as under :- 1) That the Ld. CIT(A) erred in not considering the fact that order u/s 153A, passed on 14.10.2016 was barred by limitation, since the assessment proceedings got time barred on 31.03.2016. The order passed on 14.10.2016 on the ground that it has referred for valuation u/s 142A of the I. T. Act. The property was constructed between F.Y. 2006-07 to 2008-09 and the Valuation officer did not give any adverse finding. The said valuation offered u/s 142A is not based on any incriminating seized documents and the property constructed does not pertain to this year. Hence, passing the said order beyond due date allowed u/s 153B of the LT. Act is barred by limitation & void. The assessment order passed by the AD u/s 153A/143(3) on 14.10.2016, being barred by limitation u/s 153B of the Act becomes invalid and needs to be quashed. 2) That the Ld. CIT(A) was wrong in not allowing credit of investment received back from M/s Bhaskar Steel of a sum of Rs. 1,05,08,330/- in A.Y. 2011-12 and allowing the said amount as set-off against assessee's investments made during the year in Mls Improve Traders P. Ltd. Hence, the addition needs to be reduced by Rs. 1,05,08,330/- for which necessary direction may kindly be issued. 3) That the assessee craves to leave, add, alter, amend or withdraw any ground or grounds of appeal before or at the time of hearing. Grounds raised in the case of Mahesh Kumar Agrawal IT(SS)A Nos.119/CTK/2018 for A.Y.2013-14 read as under :- 1) That the Ld. CIT(A) erred in not accepting the investment made by the Assessee Group through his wife Smt. Sanju Agarwal amounting to Rs.54,02,5401- in M/s Improve Traders P. Ltd. It was explained to the Ld. CIT(A) that the assessee's share of investments is basically made by him & his family members and group concerns. The action of the Ld. CIT(A) accepting partially & not accepting the investment of his wife Smt. Sanju Agarwal, even in the Appellate Order of Mr. Sanju Agarwal, Ld. CIT(A) has accepted her cash flow showing
4 IT(SS)A Nos.44/CTK/2018 IT(SS)A Nos.117-119/CTK/2018 IT(SS)A Nos.146&147/CTK/2018 & ITA No.382/CTK/2018 investment by her of Rs. 54,02,5401- in M/s Improve Traders P. Ltd. Hence, the addition made to the extent of Rs. 54,02,5401- needs to be deleted. 2) That the assessee craves to leave, add, alter, amend or withdraw any ground or grounds of appeal before or at the time of hearing. Grounds raised in the case of Mahesh Kumar Agrawal ITA No.382/CTK/2018 for A.Y. 2014-15 read as under :- 1) That the Ld. CIT(A) erred in not accepting the claim of Smt. Sanju Agarwal ('wife of assessee) of the cash found of Rs.1,65,000/- belong to her and was part of her income offered for the year under consideration. Further, in her appellate order, the Ld. CIT(A) accepted the cash flow out of the income disclosed as application of Rs.1,65,000/- in the cash found in course of search. Hence, the Ld. CIT(A) was wrong in taking double stands by not accepting the said fact in assessee's case. The said addition needs to be deleted. 2a) That the Ld. CIT(A) erred in not accepting the claim of Smt. Sanju Agarwal ( wife of assessee), out of jewellery found 579 gms belonged to her which was duly disclosed in VOIS 1997 and was part of her income offered for that year. In place of that, the Ld. CIT(A) only allowed 500 gms as per CBOT circular on the ground that no evidence was provided of the newly converted jewellery from the old jewellery. When the jewellery has been tallied in totality 579 gms was disclosed in VDIS needs to be allowed in place of relief given of 500 gms considering the CBOT circular. Thus, The Ld. CIT(A) giving the relief in the order needs to be modified to this extent. 2b) That the Ld. CIT(A) erred in not accepting the claim of Smt. Sanju Agarwal (wife of assessee) of the jewellery found of Rs.7,08,358/- belonged to her and was part of her income offered for the year under consideration. Further, in her appellate order, the Ld. CIT(A) accepted the jewellery found in course of search out of the income disclosed as application of funds and that was already explained. Hence, the Ld. CIT(A) was wrong in taking double stands by not accepting the said fact in assessee case. The said addition is needs to be deleted.
5 IT(SS)A Nos.44/CTK/2018 IT(SS)A Nos.117-119/CTK/2018 IT(SS)A Nos.146&147/CTK/2018 & ITA No.382/CTK/2018 3) That the assessee craves to leave, add, alter, amend or withdraw any ground or grounds of appeal before or at the time of hearing. Grounds raised by the revenue in the case Mahesh Kumar Agrawal IT(SS)A No.146/CTK/2018 for A.Y.2011-12 read as under :- (1) That in facts and circumstances, the Ld. CIT (Appeals) has erred in deleting the addition of Rs.9,30,00,000/- on account of investment (as refund of security money and cost of material) as the same was made on the basis of seized document MAR-09 which is an agreement for cancellation of MOU. (2) That in facts and circumstances, the Ld. CIT (Appeals) has erred in accepting the explanation of assessee that investment of Rs. 9,30,00,000/- were made through group companies/concerns of the assessee through banking channels ignoring the fact that the agreement on which the addition was made was done directed between the assesses and Bharat Settl and Ferro Alloys Ltd.(BSFAL). There was no evidence in record to establish the fact that the payments were made by group companies/concerns of the assessee on behalf of the assessee. (3) That in facts and circumstances, the Ld. CIT (Appeals) has erred in ignoring the fact that though the assessee claimed that the amount of Rs.2.25 crores was paid by Matushree Steel Industries (P) Ltd (MSIPL) (group company) to BSFAL in the F.Y. 2009-10 which was outstanding as on 31- 03-2010, the company MSIPL did not prepare any balance sheet for year ending 31-03-2010 and prepared a consolidated balance sheet upto 31-03-2011. Therefore, it is not established whether this payment was made to BSFAL by itself or on behalf of assessee. The assessee in his personal balance sheet for year ending 31-03-2010 has not shown any amount received from MSIPL or paid to BSF AL. So, the transaction made between BSF AL and other group companies/concerns may be true but the same are different from the transactions as mentioned in the seized documents. (4) That in the facts and circumstances, the CIT(A) erred in deleting the addition of Rs.3,00,00,000/- as premium receipt from BSF AL on the ground that there was not evidence to come to the conclusion that 3 crores premium was paid by BSFAL to assessee when the assessee in his statement dated
6 IT(SS)A Nos.44/CTK/2018 IT(SS)A Nos.117-119/CTK/2018 IT(SS)A Nos.146&147/CTK/2018 & ITA No.382/CTK/2018 24-10-2013 vide Q. No. 34 has accepted that the said transaction took place towards lease of plant. (5) That in facts and circumstances, the Ld. CIT (Appeals) has erred in deleting the addition of Rs. 40,00,000/- on account of security deposit. The security deposit mentioned in the seized document was of Rs.6,00,00,000/- whereas the addition in the assessment order was made of Rs.6,40,00,000/-. The Ld. CIT(A) ought to have considered that the assessee himself stated before the AO during the course of assessment that Rs.6,40,00,000/- was pad to BSFAL as security deposit. (6) That in facts and circumstances, the Ld. CIT (Appeals) has erred in deleting the addition of Rs. 15,08,830/- on account of unexplained investment being cash payment to M/s Geeta Rani Mohanty. The Ld. CIT(A) accepted the explanation of the assess that the amount was paid from admitted undisclosed amount of Rs. Assessee of Rs. 1,65,59,380/- though no corroborative evidence was produced regarding the said claim. (7) Any other group that may be urged at the time of hearing. Grounds raised by the revenue in the case Mahesh Kumar Agrawal IT(SS)A No.147/CTK/2018 for A.Y.2012-13 read as under :- (1) That in facts and circumstances, the Ld. CIT (Appeals) has erred in deleting the addition of Rs.4,57,00,000/- which was made by the A.O. on the basis of seized document on account of unexplained investment in the project of Improve Trades(P) ltd. The CIT(A) considered that the said payment was made by assessee through Matushree Steel Industries (P) Ltd.(MSIPL) as unsecured loan. (2) That in facts and circumstances, the Ld. CIT (Appeals) has erred in deleting the addition of Rs.4,57,00,000/- ignoring the fact that the assessee has not established that the aforesaid amount of loan by MSIPL is also included in the amount of investment by the assessee recorded in the seized document on the basis of which addition had been made. (3) That in facts and circumstances, the Ld. CIT (Appeals) has erred in allowing set offof balance amount of investment of Rs.60,51,050/- with the undisclosed income available in A.Y. 2011- 12 though there is no such provision in the Ac about such set off.
7 IT(SS)A Nos.44/CTK/2018 IT(SS)A Nos.117-119/CTK/2018 IT(SS)A Nos.146&147/CTK/2018 & ITA No.382/CTK/2018 (4) That in facts and circumstances, the Ld. CIT (Appeals) has erred in deleting the addition of Rs. 32,50,000/- on account of undisclosed receipt towards cost of iron ore fines ignoring the fact that refusal to make payment by the AMG group to the assessee in violation of MOU is not possible and the assessee has not instituted any legal proceeding against AMG group and was failed to furnish anyu correspondence with the AMG group in this regard. (5) That in facts and circumstances, the Ld. CIT (Appeals) has erred in deleting the addition of Rs.36,81,336/- on account of deposit from OMC ignoring the fact that refusal to make payment by the AMG group to the assessee in violation of MOU is not possible and the assessee has not instituted any legal proceeding against AMG group. (6) Any other group that may be urged at the time of hearing. Grounds raised in the case of Smt. Sanju Agrawal IT(SS)A No.44/CTK/2018 for A.Y.2011-12 read as under :- 1) That the Ld. CIT(A) erred in not considering the fact that A.O was wrong in passing the assessment order u/s 153A on 14.10.2016 since the assessment proceedings got time barred on 31.03.2016. The order passed on 14.10.2016 even does not contain any reason/justification for passing the order beyond due date allowed u/s 1538 of the LT. Act. The assessment order passed by the AD u/s 153A/143(3) on 14.10.2016, being barred by limitation u/s 1538 of the Act becomes invalid and needs to be quashed. 2) That the assessee craves to leave, add, alter, amend or withdraw any ground or grounds of appeal before or at the time of hearing.
As the issues raised in these appeals are common and relate to assessee(s) of same group at the request of all the parties all the appeals were heard together and are being disposed of by this common order for sake of convenience and brevity. {{
We will first take up common legal issue. On perusal of the grounds we find that for A.Y.2011-12 and 2012-13 in the case
8 IT(SS)A Nos.44/CTK/2018 IT(SS)A Nos.117-119/CTK/2018 IT(SS)A Nos.146&147/CTK/2018 & ITA No.382/CTK/2018 of Mr. Mahesh Kumar Agrawal and for A.Y. 2011-12 in the case of Smt. Sanju Agrawal, common legal issue has been raised by both the assessee(s) that the assessment proceedings u/s 153A of the Act are barred by limitation and deserves to be quashed as due date for framing the assessment was on 31.03.2016 but the assessment order was passed on 14.10.2016 and Ld. AO erred in making reference to DVO u/s 142A of the Act. To examine this issue we will take up the facts of the assessee namely Shri Mahesh Kumar Agrawal.
Brief facts of the case as culled out from the records are that the assessee is an individual engaged in the business Transporting arrangement and also income from commission. He is also Director in M/s. Matushree Steel Industries Pvt. Ltd. Search and seizure operation u/s 132 of the Act conducted at the business premises of M/s Improve Traders Pvt. Ltd. & Group on 24.10.2013. Notice u/s 153A of the Act was duly served upon the assessee to file the returns. During the course of assessment proceedings it was observed that the assessee jointly with his wife Smt. Sanju Agrawal had made investment in residential house situated at O-10, Civil Township Rourkela Dist. Sundargarh Odisha. Such investments were made during the F.Y. 2006-07 to 2008-09 and also during F.Y. 2012-13 & 2013-14. It was also observed that the assessee has surrendered undisclosed investment made in this residential house during A.Y. 2013-14 and 2014-
9 IT(SS)A Nos.44/CTK/2018 IT(SS)A Nos.117-119/CTK/2018 IT(SS)A Nos.146&147/CTK/2018 & ITA No.382/CTK/2018
Ld. AO made a reference to the valuation officer u/s 142A of the Act on 14.01.2016. Normal time limit to complete assessment u/s 153B of the Act was on 31.03.2016. Valuation report was received on 16.08.2016 and assessment was completed on 14.10.2016. However, Ld. AO made no addition for the undisclosed investment in residential house in the hands of assessee and Smt. Sanju Agrawal for A.Y. 2011-12 & 2012-13. Apart from this issue Ld. AO made other additions based on the seized material and assessed the income accordingly. The assessee along with challenging the additions made on merit also challenge legality of the assessment order stating it to be time barred and also raising other legal issues that no opportunity was granted by Ld. AO to assessee before making reference to valuation cell and also the reference was illegal as no incriminating documents with regard to undisclosed investment is house property was found and since reference is not valid, limitation cannot be extended. However, assessee failed to get relief on this legal issue from Ld. CIT(A).
Now assessee is in appeal before this Tribunal challenging legality of the assessment framed u/s 153A r.w.s. 143(3) of the Act for A.Y. 2011-12 & 2012-13 in the case of assessee namely Mahesh Kumar Agrawal and for A.Y. 2011-12 in the case of Smt. Sanju Agrawal. Ld. counsel for the assessee vehemently argued referring to the written submission filed before the ld. CIT(A) during the appellant proceedings and also referred to the detailed written submissions running in 10 IT(SS)A Nos.44/CTK/2018 IT(SS)A Nos.117-119/CTK/2018 IT(SS)A Nos.146&147/CTK/2018 & ITA No.382/CTK/2018 17 pages forming part of the paper book filed on 16.11.2020. Crux of the argument made by the ld. counsel for the assessee can be summarized in following points:
The issue is that opportunity of being heard is to be given to assessee before reference u/s 142A to Valuation cell.
There has to be application of mind before deciding to send to the valuation cell.
Reference u/s 142A is not mandatory.
Reference made is illegal if no incriminating document with regard to investment inhouse property was found.
If the reference made is illegal, The AO cannot take advantage of his own mistake
If the refence is not valid, limitation cannot be extended
Even if it is presumed that the refence was valid, the Valuation report is not received within 6 months, limitation is to be counted from the date of expiry of 6 months i.e. from 31.7.2016 and 60 days therefrom ends on 29.9.2016 whereas the assessment was completed on 14.10.2016
In support of his contention Ld. counsel for the assessee placed reliance on the decisions mentioned below:
Sahara India (Firm) Lucknow (SC) Civil Appeal no. 2783 of 2008
Rajesh Kumar & Ors vs D.C.I.T. & Ors., (SC) 157 Taxman 168
S N Mukherjee vs Union of India 1990 AIR 1984
B M Malni vs Commissioner of Income tax (Supreme Court)
Vetch Sreemamurthi, 30 ITR 252 (Andhra High Court)
Goodluck Automobiles P Ltd. the Gujrat High Court 359 ITR 306
Jithendra Singh Chaddha in ITA No.2732/Del/2018 dated 31/12/2018
ACIT , Coimbatore VS Cotton City Developers P Ltd., ITA No. 1575 & 1794/12 dated 22.1.2016 Chennai
Delhi High Court Abhinav Kumar Mittal 351 ITR page 20
High Court of Gujarat in Anand Banwarilal Adhukia vs. DCIT reported in [2016] 75 taxmann.com 301
B.M. Malani Vs. Commissioner of Income Tax and Anr. 2008 (10) 14:
Nirmala Anand Vs Advent Corpo ration(P) Ltd (2002) 5 SCC 481:
11 IT(SS)A Nos.44/CTK/2018 IT(SS)A Nos.117-119/CTK/2018 IT(SS)A Nos.146&147/CTK/2018 & ITA No.382/CTK/2018
Rajesh Kumar & Ors vs D.C.I.T. & Ors., (SC) 157 Taxman 168
CIT vs Shri Subb oji Rao Karnataka High Court
Dr S B Bhargava vs CIT 136 IYR page 559, (Allahabad)
Swadeshi Cotton Mills Co. Ltd. vs Income-Tax Officer 37 ITD 522 All 18. Jindal Dyechem Industries Ltd.
Zulfi Revdjee ITA 2415/Hyd/2018 dated 5.9.2019
Ld. counsel for the assessee also submitted that the ld. CIT(A) observed that the Ld. AO was not aware of the year of construction and that he referred the issue of determination of the investment as well as the year of construction but this appears to be wrong assumption. Ld. AO was aware of the year of construction. Not only that if the Ld. AO was not aware of the year of construction, he would also have recorded the same satisfaction for assessment year 2013-14 and 2014-15. However, the AO made no such satisfaction in assessment year 2013-14 and 2014-15 vide copy of the order sheet enclosed herewith and further he completed the assessment for the above two years in March 2016 itself without waiting for the Valuation Report. Therefore the reference to valuation officer was illegal and assessment for the Assessment year 2011-12 and 2012-13 are barred by limitation.
Per contra, ld. DR vehemently argued referring to the following written submissions: i.) This is the Assessee's appeal against the order of Id. CIT(A)-2, Bhubaneswar dated 3l.0l.2018. The Id. CIT(A) in paras-4.2 to 4.6 on pages 12 to 14 of the appellate order has held that the assessment order completed u/s. 153A r.w.s. 143(3) was not barred by limitation of time and hence the appeal of the assessee on this ground was dismissed by him. ii.) Before delving into the legal aspects, it is necessary to examine the relevant dates in the present case
12 IT(SS)A Nos.44/CTK/2018 IT(SS)A Nos.117-119/CTK/2018 IT(SS)A Nos.146&147/CTK/2018 & ITA No.382/CTK/2018 Date of search 24.10.2013 Date of issue of notice u/s, 153A 17.03.2015 Date of filing return in response to said notice 15.06.2015 Time limit to complete the assessment u/s.153B 3l.03.2016 Date of making a reference to Valuation Officer 14.0l.2016 Date of receipt of Valuation Report 16.08.2016 Time Period to be excluded as per Explanation-iii 214 days Time Period to complete the assessment 3l.10.2016 Date of completion of assessment by the A.O. 14.10.2016 It may please be appreciated that husband of the appellant namely Shri Mahesh Kumar Agarwal had disclosed unexplained investment of Rs.20 lakhs in construction of house for AY 2013-14 and unexplained investment of Rs.15 lakhs for AY 2014-15. Kindly refer to page-14 of the paper book (124 pages) filed on 24.10.2018. Even in AY 2010-11, the first floor was constructed by the appellant (page-IS of paper book filed on 24.10.2018). This information/fact was not disclosed to the Valuation Officer. Please refer to page-4E of paper book (consisting of 355 pages) filed on 26.09.2019 in case of Shri Mahesh Kumar Agarwal. As a result, the Valuation Officer did not comment upon this aspect. iii.) The objective of insertion of Explanation-iii and Proviso thereof is to amend the bar of limitation in a case where the A.O. has made a reference to the Valuation Officer and provide him an extended period to complete the assessment. It is respectfully submitted that Rowlatt, L. observed in Cape Brandy Syndicate vs. Inland Revenue Commissioners as under: "In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used". iv.) The combined reading of Explanation-iii and the intention of the legislature in above proviso clearly shows that it was envisaged that there would be class of cases where the Valuation Report is received when less than 60 days are remaining or available from the period of limitation under the normal provisions. Thus, in order to avoid hardship and give reasonable period to complete the assessment, the period of limitation is extended up to 60 days.
13 IT(SS)A Nos.44/CTK/2018 IT(SS)A Nos.117-119/CTK/2018 IT(SS)A Nos.146&147/CTK/2018 & ITA No.382/CTK/2018 v.) It must be appreciated that the first line of proviso to Explanation to Section 153B reads "that where immediately after the exclusion of the aforesaid period". The above phrase clearly refers to time or period referred in clause (i) to (ix) of Explanation 1, which needs to be excluded or not to be reckoned for computing the period of limitation. Thereafter, the proviso reads "the period of limitation referred to in clause (a) or clause (b) of this sub-section available to the Assessing Officer for making an order of assessment, reassessment or re- computation, as the case may be, is less than sixty days". The above part shows that proviso would be applicable, only in cases where after the exclusion of the period of making a reference and receiving the Valuation Report, the period of limitation for completing the assessment available with the Assessing Officer is less than sixty days It implies that the A.O., after excluding the time utilized in getting the Valuation Report, should have some time or period available within the period of limitation i.e. within those 24 months (as the case may be) . And at the end of the proviso, it states which period can be extended in the following words "such remaining period shall be extended to sixty days and the aforesaid period of limitation shall be deemed to be extended accordingly". It implies that that such remaining/available period after obtaining the Valuation Report within the period of limitation of 24 months if less than 60 days should be extended to 60 days. Reading the above meaning of the word "available/remaining" herein, it can be inferred that there has to be something positive available within the period of limitation. It cannot be zero or Nil. Some period has be left over with the AO to be construed as remaining or available. vi.) From the chronological events highlighted above, 76 days were remaining when the matter was referred to the Valuation Officer. Since the reference was made well within the period of limitation, the AO should be given the benefit of the Explanation-iii and the proviso. vii.) Provisions of the Act here cast an obligation on the AO that in case, the matter is referred to a valuation officer and the AO is not able to receive the information within the time limit prescribed under section 153B, then he will get extended period to complete the assessment. In case where the remaining period to complete the assessment is less than 60 days then proviso gives a period of up to 60 days to complete the assessment. viii.) In the case of M K Srikanta Setty vs. CIT (1986) 160 ITR 517, the Hon'ble Karnataka High Court held that the fixation of periods of limitation must always be to some extent arbitrary and may frequently result in hardship. But, in construing such provisions, equitable considerations are out of place and strict grammatical meaning of the words is the only safe guide.
14 IT(SS)A Nos.44/CTK/2018 IT(SS)A Nos.117-119/CTK/2018 IT(SS)A Nos.146&147/CTK/2018 & ITA No.382/CTK/2018 ix.) The provisions of section 142(2A) of the Act are totally different. The same is evident from the Proviso to section 142(2C) and Explanation (ii) to section 153B. Hence the judgements rendered in context of section 142(2A). shall not be applicable to the section 142A of the Act. Without prejudice to the above, even otherwise, the Hon'ble Delhi High Court in the case of CIT vs. Ulike Promoters (P.) Ltd. (19 taxmann.com 8) held that benefit of period of 60 days in terms of proviso to Explanation to section 153B can be availed by the AO any number of times whenever it is so required (para-18). In view of above facts, this ground of appeal taken by the appellant is required to be dismissed.
We have heard rival contentions and perused the records placed before us. The common legal issue raised before us by the assessee namely Mahesh Kumar Agrawal for A.Y.2011- 12 & 2012-13 and Smt. Sanju Agrawal for A.Y. 2011-12 is that the assessment order framed u/s 153A r.w.s. 143(3) of the Act are time barred being framed beyond the limitation period provided under the Act. We find that the search action u/s 132 of the Act was conducted on 24.10.2013. In the normal course time limit to complete the assessment u/s 153B of the Act is within two years from the end of the F.Y. in which search took place. Since search took place on 24.10.2013 the normal time limit to complete the assessment is 31.03.2016. Before completion of statutory time limit Ld. AO made reference to the valuation officer u/s 142A of the Act on 14.01.2016 for examining investment made in residential house situated at O-10, Civil Township Rourkela Dist. Sundargarh Odisha jointly held in the name of Mahesh Kumar Agrawal & Smt. Sanju Agrawal. Valuation report was received on 16.08.2016 and in this valuation report the investment was stated to be made during F.Y.
15 IT(SS)A Nos.44/CTK/2018 IT(SS)A Nos.117-119/CTK/2018 IT(SS)A Nos.146&147/CTK/2018 & ITA No.382/CTK/2018 F.Y.2006-07, F.Y. 2007-08 & 2008-09 and he did not cover F.Y. 2009-10 & 2011-12 as there was no such investment made by the assessee in this period.
We also find that after receiving valuation report ld. AO has made no addition for unaccounted investment in the residential house for A.Y.2011-12 & 2012-13 which are the year under appeal before us.
Moot question which remains to be dealt by us is that under the given facts when there is no addition made for undisclosed investment for residential house for A.Y. 2011- 12 & 2012-13 was the reference made to the valuation officer was valid and if the reference to the valuation officer was not valid then the time limit for framing assessment for A.Y. 2011-12 & 2012-13 expires on 31.03.2016 whereas the assessment order have been framed on 14.10.2016. 12. As noted above that the search was conducted on 24.10.2013 but undisputedly no incriminating documents not even a whisper was found and seized during the course of search showing any undisclosed investment in the construction/investment in the house in any year from A.Y. 2008-09 to 2012-13 nor any such paper has been referred to or relied in any of the assessment orders in question before us. As stated by the ld. counsel for the assessee the construction of ground and first floor of the house was completed during A.Y. 2008-09 to 2009-10 , construction of 16 IT(SS)A Nos.44/CTK/2018 IT(SS)A Nos.117-119/CTK/2018 IT(SS)A Nos.146&147/CTK/2018 & ITA No.382/CTK/2018 Second floor was started and completed during A.Y. 2014-15 for which a separate disclosure was made by the assessee and such construction or investment thereto is not disputed.
We also note that in the course of search seized paper appearing No. MAR-1 (98) was found and seized which showed that the house was completed and assessee’s family shifted to the new house in November 2008. This fact further get confirmed by the notice dated 09.09.2016 issued by Ld. AO wherein he referred to the statement of the assessee recorded u/s 132(4) of the Act stating that the investment in house property was made during the F.Y. 2006-07 to 2008- 09 and in A.Y. 2012-13 only some home appliances was purchased which are duly recorded in books and for this investment there was no dispute.
As evident from paper book pages 1A to 1-I showing order sheet for A.Y. 2009-10 to 2012-13 in which Ld. AO recorded the reference to DVO and there is no mention that the house was constructed in F.Y. 2010-11 and 2011-12. Prima facie it appears that there is no application of mind by Ld. AO nor there was any material on record to justify the reference to the DVO for estimating the unaccounted investment in house property during A.Y. 2011-12 & 2012-
We further note that as per the mandatory provisions of section 142A, the AO can make reference to valuation officer only if he is required to estimate the cost of construction.
17 IT(SS)A Nos.44/CTK/2018 IT(SS)A Nos.117-119/CTK/2018 IT(SS)A Nos.146&147/CTK/2018 & ITA No.382/CTK/2018 Thus, the AO has to first apply his mind to the cost of construction declared, that the same is understated and the investment has to be estimated. For this purpose, Ld. AO has to apply his mind before making reference to Department Valuation officer. We also note that before referring the matter to DVO Ld. AO has not allowed the assessee any opportunity to explain the cost of construction, nor he himself examined the books and documents lying with him and also did not come to the finding that investment was required to be estimated. The assessee was not heard on the issue before making reference which is not in conformity to the principles of natural justice There was also no material on record nor the AO collected any material to suggest that investment was also made in F Y 2010-11 and 2011-12 which was not properly explained and therefore the investment is required to be estimated. Even in the letter written to the Valuation Officer making reference it is nowhere mentioned that there was construction in FY 2010- 11 and 11-12. 16. Further it is noted that the year of construction i.e. Assessment. year 2007-08, 2008-09 and 2009-10 was within the knowledge of the AO. Firstly the Seized documents Sl. No. MAR -1( page 98) Paper book page 324 showed that the construction was completed and the assessee duly shifted to the house in November, 2008, secondly, the statement of the assessee was recorded u/s.132(4) on 13.12.2013 ( P.B. No.325-326 & 313-314) which was within
18 IT(SS)A Nos.44/CTK/2018 IT(SS)A Nos.117-119/CTK/2018 IT(SS)A Nos.146&147/CTK/2018 & ITA No.382/CTK/2018 the knowledge of the AO that the construction was completed in Nov 2008 and further construction was done in F Y 2013-14 only. This statement was within the knowledge of the AO vide his letter dated 9.9.2016 (P.B. pg No. 327 - 329) as well as from the information made available to the Valuation officer with regard to the year of construction as stated in the facts. Therefore the finding of the Ld. CIT(A) that the year of construction was not within the knowledge of the AO is not correct. In fact, the Ld. AO has not referred to determine the year of construction as is apparent from his reference (page 330-331) since the same was known to him. Furthermore, section 142A can be invoked for the purpose of making assessment for a particular year and determine the investment. Ld. AO has mentioned the year of construction with reference to the cost of construction incurred by the assessee. Section 142A of the Act does provide that reference can be made for the purpose of determining the year of construction but reference can be made only when he is satisfied that there was construction during a particular assessment year. As per the provisions of section 142A of the Act. Ld. AO for the purpose of making assessment for any year “may” make reference for valuation of the property to the DVO to estimate the cost of construction. The word “may” suggest that the AO may or may not refer to the DVO. Reference can be made to the Valuation Officer “to estimate” the fair market value “for the purposes of assessment or reassessment”. The word is “assessment or reassessment”
19 IT(SS)A Nos.44/CTK/2018 IT(SS)A Nos.117-119/CTK/2018 IT(SS)A Nos.146&147/CTK/2018 & ITA No.382/CTK/2018 and not “assessments or reassessments” This shows that reference can be made for the “purpose of assessment” only for the year during which the construction was made and for which the assessment was pending. The facts stated before us shows that it was within the knowledge of the AO that construction was completed in F.Y. 2007-08 and 2008-09. Therefore, firstly reference for valuation could have been made only for the assessment year A Y 2008-09 and 2009-10 and not for the assessment year 2011-12 and 2012-13. Further, reference cannot be made for assessment year 2008-09 and 2009-10 since the assessment for those two years was not abated as admittedly no incrementing document was found or seized. It is evident that reference u/s 142A is discretionary since the words used are that the AO “may” make a reference. Therefore, when discretion is to be exercised, it cannot be arbitrary or without any reason but the AO has to exercise such discretion on judicial grounds and for substantial reasons. If the reference is invalid, limitation cannot be extended.
Under these given facts and circumstances of the case we find merit in the contentions made by the ld. counsel for the assessee that the assessment order u/s 153A r.w. 143(3) of the Act dated 14.10.2016 for A.Y. 2011-12 and 2012-13 in the case of Mahesh Kumar Agrawal and Sanju Agrawal are liable to be quashed and annulled being barred by limitation since reference made to the Department valuation
20 IT(SS)A Nos.44/CTK/2018 IT(SS)A Nos.117-119/CTK/2018 IT(SS)A Nos.146&147/CTK/2018 & ITA No.382/CTK/2018 officer for A.Y.2011-12 & 2012-13 for knowing about the unaccounted investment in jointly owned residential house was not valid as neither any incriminating material for unaccounted investment was found during the course of search nor there was any actual construction of house during this period and as such there was no basis with the Ld. AO to make reference to the DVO for A.Y. 2011-12 & 2012-13. It is also evident that although the reference was not valid but ld. AO further erred in not providing any opportunity of being heard to the assessee before making reference and there was no application of mind before deciding to make a reference to the valuation cell.
For the proposition that an opportunity of being heard is to be given to assessee before making reference u/s 142A of the Act, we rely on the order by Hon'ble Supreme Court in the case of Sahara India (Firm) Lucknow (SC) Civil Appeal no. 2783 of 2008 wherein it is held that even if there are no provisions for giving an opportunity of being heard before making reference u/s 142(2A), if any administrative or quasi- judicial order is passed making reference, the assessee has to be given an opportunity of heard.
For the proposition that there should be an application of mind by the ld. AO before deciding to make reference to the DVO, we find support from the judgment of Hon'ble’ Gujarat High Court in the case of Goodluck Automobiles P. Ltd. 359 ITR 306 wherein it has been held that “reference can be made
21 IT(SS)A Nos.44/CTK/2018 IT(SS)A Nos.117-119/CTK/2018 IT(SS)A Nos.146&147/CTK/2018 & ITA No.382/CTK/2018 only if investment is to be estimated and also held that while examining the books if the AO had any doubt on the correctness of account then only reference can be made. It was also held that the AO has to record a satisfaction before referring to the valuation officer”. Examining the instant case we find that there was no material available with the ld. AO to raise doubt on the unaccounted investment alleged to be made by the assessees for A.Y. 2011-12 & 2012-13 and also there was no proper satisfaction before referring to the valuation officer.
For the proposition that reference u/s 142A is not mandatory as Ld. AO himself completed the assessments for further years assessed post search within the time limit provided u/s 153B of the Act there was no reason to make reference to DVO for A.Y. 2011-12 and 2012-13. In the case of Jithendra Singh Chaddha in ITANo.2732/Del/2018 dated 31.03.2018 Coordinate Bench Delhi has held that “it was held that reference of matter to the DVO by the Assessing Officer for valuation of property is not mandatory. In our opinion, the provisions of section 142A of the Act provides that the Assessing Officer may refer the matter to the DVO for the purpose of estimation of the value of the asset, property or investment and get a copy of the report from the DVO. The word „may‟ make it discretionary to refer the matter to the DVO. It cannot be said by any stretch of imagination that it is mandatory”
22 IT(SS)A Nos.44/CTK/2018 IT(SS)A Nos.117-119/CTK/2018 IT(SS)A Nos.146&147/CTK/2018 & ITA No.382/CTK/2018
For the proposition that reference made to DVO is illegal if no incriminating document with regard to investment is house property was found, we place reliance on the judgment of Hon'ble Delhi High Court in the case of Abhinav Kumar Mittal 351 ITR 20 (supra) wherein it has been held that “no reference has to be made to DVO unless incriminating documents is found in the course of search. Similar view was also taken by Hon'ble Gujarat High Court in the case of Anand Banwarilal Adhukia vs. DCIT (supra ) holding that “the other relevant provision which is required to be considered is that section 69 of Act pertains to unexplained investment, whereas section 69A pertains to unexplained money etc not fully disclosed in books of accounts and therefore, these statutory provisions are related to a case where assessee had made certain investment or expenditure or is found to be the owner of any bullion, related to a case where assessee had made certain investment or expenditure or is found to be the owner of any bullion, jewellery etc and the same are not properly recorded in the books of account. The court in a decision of ME and Mummy Hospital (supra), while referring to these statutory provisions read with section 142A of the Act is simply not permissible. It is only when there is some material before the Assessing Officer to hold that the case of an assessee falls under section 69, as the case may be, then he can, to estimate the value of such unexplained investment or expenditure in bullion, jewellery etc and call for report of the valuer and therefore, the Division Bench of this Court has 23 IT(SS)A Nos.44/CTK/2018 IT(SS)A Nos.117-119/CTK/2018 IT(SS)A Nos.146&147/CTK/2018 & ITA No.382/CTK/2018 observed that initial starting point for triggering a reference to the valuer, therefore, has to be invocation of section 69 of the Act and therefore, unless and until such contingencies are reflecting on the record, reference under suction 142A cannot be resorted to.”
We, therefore, respectfully following the judgment and decision referred hereinabove and also on examination of the facts are of the view that Ld. AO erred in making reference to the Valuation Officer as there was no incriminating material found during the course of search alleging any unaccounted investment in the house for A.Y. 2011-12 & 2012-13 and also Ld. AO erred in making the reference to DVO by not making proper application of mind ignoring the fact that assessee shifted to the house in November 2008 itself and there was no construction of the house during F.Y. 2009-10, 2010-11 & 2011-12. Therefore, since the reference to DVO was illegal the assessment completed u/s 153A r.w.s. 143(3) of the Act on 14.10.2016 are barred by limitation as the time limit to conclude these assessments was on 31.03.2016. Since assessment framed in the case of assessee Mahesh Kumar Agrawal for A.Y. 2011-12 & 2012-13 and in case of another assessee namely Sanju Agrawal for A.Y. 2011-12 are barred by limitation, they deserves to be quashed and annulled. Thus, legal ground raised by the assessee in A.Y.2011-12 & 2012-13 are allowed.
24 IT(SS)A Nos.44/CTK/2018 IT(SS)A Nos.117-119/CTK/2018 IT(SS)A Nos.146&147/CTK/2018 & ITA No.382/CTK/2018
Since we have already annulled and quashed the assessment order for A.Y.2011-12 & 2012-13, dealing with grounds raised on merits by assessee as well as revenue becomes merely academic in nature and the same deserves to be dismissed as infructuous.
In the result legal raised by the assessee for A.Y. 2011-12 to 2012-13 are allowed and remaining grounds raised by the assessee and revenue on merits are dismissed as infructuous.
Now we take up IT(SS) ANo. 119/CKT/2018 and ITA No.382/CTK/2018 for A.Y. 2013-14 & 2014-15 respectively in the case of assessee namely Mahesh Kumar Agrawal
As regards the assessee’s appeal for A.Y. 2013-14 in ITANo.119/CTK/2018 is concerned we find that the only issue related to denial of set off of the amount of Rs.54,02,540/- owned by Smt. Sanju Agrawal by Ld. CIT(A) against investment made by the assessee.
We find that Ld. CIT(A) has accepted that the assessee’s wife Smt Sanju Agrawal had Rs.54,02,540/- available with her but Ld. CIT(A) did not allow set off of this amount against addition made in the hands of her husband is assessee for the reason that the set off can be allowed only to the same person but not to other individuals.
We find that the Mahesh Kumar Agrawal has invested 50% in the project but such investment is made by him and his group and this fact is not in dispute in assessment order.
25 IT(SS)A Nos.44/CTK/2018 IT(SS)A Nos.117-119/CTK/2018 IT(SS)A Nos.146&147/CTK/2018 & ITA No.382/CTK/2018 When the members of the family have funds and for various investment fund have been pooled together, all have been subjected to search then under these given circumstances set off of the funds available with his wife should be allowed to the husband i.e. assessee. For this view we find support from the decision of Coordinate Bench Hyderabad in the case of A. Linga Reddy ITANo.245/Hyd/2013 & others dated 12.02.2014 and also from the decision of Coordinate Bench Ahmedabad in the case of Rajni M. Patel IT(SS)ANo.31/Ahd/2008 dated 15.10.2015. Therefore finding of the Ld. CIT(A) is reversed and the addition to the extent of Rs. 54,02,541/- is deleted out of the total addition of Rs. 56,29,541/- by the assessee. The sole ground raised by the assessee for A.Y. 2013-14 is allowed.
As regards the assessee’s appeal in ITANo.382/CTK/2018 for A.Y. 2014-15. The first ground related to addition of Rs. 1,65,000/- confirmed by the Ld. CIT(A) towards cash found during the course of search.
We have heard rival contentions and perused the records placed before us. Ld. counsel for the assessee stated that assessee’s wife Smt. Sanju Agrawal has stated that the alleged cash of Rs.1,65,000/- belong to her and was part of the income offered for the past and current year under consideration. Further in the appellate order of Sanju Agarwal Ld. CIT(A) has accepted the cash flow out of the income disclosed as application of Rs.1,65,000/- in the cash found in the search. We note that assessee’s wife Smt. Sanju
26 IT(SS)A Nos.44/CTK/2018 IT(SS)A Nos.117-119/CTK/2018 IT(SS)A Nos.146&147/CTK/2018 & ITA No.382/CTK/2018 Agrawal is carrying on her business and income is offered u/s 44AD of the Act.
At the time of search also same explanation was given by her and no question was raised while recording her statement. Wife of the assessee has been assessed at income of Rs.29,35,392/- and addition of Rs.19,09,775/- was further retained towards income from trading account by Ld. CIT(A). Referring to these facts and circumstances, statement given by assessee’s wife, the income offered by her to tax, we, are satisfied with the contentions that the alleged cash of Rs.1,65,000/- belong to her and no addition was called for in the hands of assessee for A.Y. 2014-15. Thus, ground no.1 is allowed.
As regards the second issue relating to retaining of addition of Rs.9,00,748/- by Ld. CIT(A) by not accepting the jewellery weighing 372.21 as not explained, after hearing both sides we note that the Ld. CIT(A) has retained the addition of Rs. 9,00,748/- by not accepting the jewellary weighing 372.21 gms as not explained. The total jewelry found was 1572.21 gms. While calculating the jewellary the Ld. AO has allowed credit for 1200 gms as per CBDT Circulars 500 gms for Srnt, Sanju Agarwal wife of assessee, 250 gms for each of the two daughters and 100 gms for son and assessee himself. The Ld CIT(A) has not even given credit for the jewellary acquired out of income for which disclosure under VDTS was made Even if, the jewellary as per
27 IT(SS)A Nos.44/CTK/2018 IT(SS)A Nos.117-119/CTK/2018 IT(SS)A Nos.146&147/CTK/2018 & ITA No.382/CTK/2018 disclosure under VDTS and further purchase as appearing in balance sheet for 31.3.2011 (120 gms) (Paper book page 8) the jewelry to the extent of 1399/500 gms is explained. The Ld CIT(A) has not accepted the jewelry and gold coins (Guinee) received as per will of grandmother simply on the ground that details of weight of Gold coins was not stated in the Will and only number of gold coins were mentioned, ignoring the fact the Guinee's has' standard weight of 8 gms. Therefore, when the will is accepted simply because weight was not mentioned in the will the explanation should not have been rejected. Further even as per CBDT circular more jewelry can be accepted considering the status of the assessee. In the circumstances of the case the status of assessee cannot also be disputed. Under the given facts, the finding of Ld. CIT(A) is reversed. Ground no.2 is allowed and addition of Rs.9,00,748/- is deleted.
Now we take up IT(SS)A No.44/CTK/2018 for A.Y. 2011- 12 raising similar legal ground of appeal as was raised in the case of Mahesh Kumar Agrawal in ITANo.117/CTK/2018 for A.Y. 2011-12. The action of the Ld. AO and finding of Ld. CIT(A) are verbatim similar to one given in the case of assessee, Mahesh Kumar Agrawal (supra). Since we have already adjudicated there issue in the case of Mahesh Kumar Agrawal (supra), we apply our decision mutatis mutandis in other Assessee’s appeal in IT(SS)ANo.44/CTK/2018 and allow only legal the ground raised by the assessee’s appeal.
28 IT(SS)A Nos.44/CTK/2018 IT(SS)A Nos.117-119/CTK/2018 IT(SS)A Nos.146&147/CTK/2018 & ITA No.382/CTK/2018
In the result, assessee’s appeal in the case of Mahesh Kumar Agrawal in IT(SS)ANo.117-118/CTK/2018 and in the case of Smt. Sanju Agrawal in IT(SS)ANo.44/CTK/2018 are allowed on legal ground and ground raised on merit are dismissed being infructuous and academic in nature & IT(SS)ANo.119/CTK/2018 & ITANo.382/CTK/2018 are allowed and Revenue’s appeal in IT(SS)ANo. 146 & 147/CTK/2018 are dismissed being infructuous. Order pronounced in the open court on 10/01/ 2022. (सी.एम.गगा) (मिीष बोरड़) (C.M.GARG) (MANISH BORAD) ऱेखा सदस्य / ACCOUNTANT MEMBER न्यानयक सदस्य / JUDICIAL MEMBER कटक Cuttack; ददनाांक Dated 10/01/2022 Patel, Sr.P.S. आदेश की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to : अऩीलाथी / The Appellant- 1. प्रत्यथी / The Respondent- 2. 3. आयकि आयुक्त(अऩील) / The CIT(A), आयकि आयुक्त / CIT 4. ववभागीय प्रनतननधध, आयकि अऩीलीय अधधकिण, कटक / DR,
ITAT, Cuttack गार्ा पाईल / Guard file. 6. सत्यावऩत प्रनत ////
आदेशािुसार/ BY ORDER,
(Senior Private Secretary) आयकर अपीऱीय अधिकरण, कटक/ITAT, Cuttack