IN THE INCOME TAX APPELLATE TRIBUNAL
CHANDIGARH BENCHES `B' CHANDIGARH
BEFORE SHRI T.R. SOOD, ACCOUNTANT MEMBER AND
SHRI. SANJAY GARG, JUDICIAL MEMBER
ITA No. 579/Chd/2012
Assessment Year : 2003-04
M/s Mahadev Rice & General Mills Vs. The AC IT, Circle IV
H.No. 62, Jawahar Nagar Ludhiana
Ahmedgarh
PAN No.AAJFM2848K
(Appellant) (Respondent)
Appellant By : Shri Sudhir Sehgal
Respondent By : Shri J.S. Nagar
Date of hearing : 23/04/2014
Date of Pronouncement : 28/04/2014
ORDER
Per Sanjay Garg, Judicial Member
The present appeal has been preferred by the assessee against order dated
30.03.2012 of C IT(A)-II, Ludhiana relevant to assessment year 2003-04
2. The assessee has taken the following grounds of appeal:-
1. "That the Worthy Commissioner of Income Tax (Appeals) has
erred in upholding that the Assessing Officer was justified in
invoking the provisions of section 148.
2. That the Worthy CIT(A) has also erred in holding that on
account of survey operation and close inspection of the
building, the investment shown in the construction was no
proper. That the finding of the CIT(A) in this regard is totally
void abinitio since there was neither any inspection of the
building nor any measurement of building nor any
measurement of building and, therefore, reference to the DVO
by the Assessing Officer was not called, for specially when
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nothing had been confronted about the alleged physical
inspection / measurement during the survey.
3. That the CIT(A) has also erred in holding that the case could
be reopened on the basis of report of the DVO, specially
when nothing has been confronted during survey and no
material has been brought on record that there was any
unaccounted investment on the building.
4. That the CIT(A) has also erred in holding that there was
pendency of proceedings when the reference to the DVO was
made, which is also not a correct finding and the binding
judgment of Hon'ble Supreme Court has been totally ignored
that no case could be reopened on the basis of DVO's report
as held by the Supreme Court in the case of ACIT vs Dhariya
Construction Company as reported in 236 CTR 226.
5. Notwithstanding the above said ground of appeal, the
CIT(A)'s order in upholding that addition of Rs. 5,28,353/-
was not called for on the basis of difference in the estimated
investment as pointed out by the DVO to the tune of Rs.
5,28,353/-
6. That the CIT(A) has also erred in ignoring the binding
judgment of Hon'ble Supreme Court in the case of Sargam
Cinema vs. CIT as reported in 241 CTR 179 as cited before
him that since no defects have been pointed out in the books
of accounts and the reliance by the CIT(A) on the physical
inspection of the old building was without any evidence on
record and is totally misconceived and liable to be brushed
aside since, how, can alleged physical inspection led to
undisclosed investment in the property since the AO is not a
technical person, at all."
3. A perusal of the above grounds taken by the assessee reveals that the onl y
effective issue which emerges of the above grounds is regarding reopening of
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the assessment u/s 147 of the Income Tax Act by the Assessing Officer on the
basis of report of the Department Valuation Officer (DVO)
4. The brief facts of the case are that the assessee in its return of income
disclosed investment of Rs.21,88,315/- towards land and building. The return
was processed u/s 143(1) of the Act. However, later on the Assessing Officer
referred the case of the DVO who estimated the total amount of investment in
land and building at Rs. 27,16,628/- vide his report dated 10.01.2007. The
Assessing Officer thereafter reopened the case u/s 147 and made the addition of
the difference of amount between that was disclosed by the assessee and the
amount estimated by the DVO which came out at Rs. 5,28,353/- and added back
the same to the total income of the assessee.
5. Aggrieved against the order of the Assessing Officer, the assessee
preferred an appeal before the C IT(A) which was dismissed by the CIT(A) vide
impugned order. Thus, the assessee is in appeal before us.
6. We have heard the Ld. Representatives of both the sides and have also
gone through the records. From the perusal of the record, it reveals that the
Assessing Officer had not any other information or reason to believe that the
income disclosed by the assessee had escaped assessment except the report of
the DVO. The reopening was made merel y on the basis of estimation of
investment made by the DVO. The Hon'ble Supreme Court in the case of AC IT
Vs. Dhari ya Construction Company (2010) 328 ITR 515 (SC) has held that the
opinion of the DVO per se is not an information for the purpose of reopening of
assessment u/s 147 of the Income Tax Act. Such a reopening which is based on
merel y upon the opinion of the DVO was held to be bad in law. Similarl y, in
the case of Sargam Cinema Vs. C IT (2010) 328 ITR 513 (SC), the Hon'ble
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Supreme Court has held that Assessing Officer could not refer the matter to the
DVO without the books of account of the assessee being rejected.
In the case in hand also, neither any information nor any such material was in
possession of the Assessing Officer from which it could have been gathered
that the income of the assessee has escaped assessment nor the Assessing
Officer rejected the books of account of the assessee. The addition was made
onl y on the basis of information / estimation of the DVO, which per se, is not an
information for the purpose of reopening of assessment u/s 147 as has been held
by the Hon'ble Supreme Court in the case of ACIT Vs. Dharia Construction
Company (supra). In view of the above settled legal position, the reopening in
this case is held to be bad in law. Therefore, the additions so made by the lower
authorities are ordered to be deleted.
7. In the result, appeal of the assessee is hereby allowed.
Order Pronounced in the Open Court on this 28/04/2014
Sd/- Sd/-
(T.R. SOOD) (SANJAY GARG)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated : 28 t h April, 2014
Rkk
Copy to:
1. The Appellant
2. The Respondent
3. The CIT
4. The CIT(A)
5. The DR
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