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M/s Mahadev Rice & General Mills H.No. 62, Jawahar Nagar Ahmedgarh Vs. The ACIT, Circle IV Ludhiana
May, 02nd 2014


                                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


(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


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

           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.

     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

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

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
Copy to:
  1.     The Appellant
  2.     The Respondent
  3.     The CIT
  4.     The CIT(A)
  5.     The DR
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