ORDER
Pramod Kumar, Accountant Member- These four appeals pertain to the same assessee, involve a common issue and were heard together. As a matter of convenience, therefore, all the four appeals are being disposed of by this consolidated order.
2. The assessee, an individual who mainly derives his income from partnership in Gupta Tobacco Co and Packotech Industries, was subjected to a search and seizure proceedings on his residential and business proceedings on 5th March 2009. It was in this backdrop that the assessee was called upon to file his income tax returns under section 153(1)(b) of the Income Tax Act, 1961, amongst other years, for these assessment years as well. The assessee filed his income tax returns disclosing incomes of Rs 5,51,480, Rs 13,79,350 and Rs 18,32,220 for the assessment years 2005-06, 06-07 and 07-08 respectively. These income tax returns were subjected to the scrutiny assessment proceedings and hearings, for that purpose, took place from time to time. During the course of these proceedings, the Assessing Officer noticed that the assessee has shown to have spent Rs 1,06,00,000, in his income tax return for the assessment year 2006-07, on the house property at 21/31A Mall Road, Delhi. The AO was of the view that this amount is far below the prevailing prices of the locality, and a reference should be made to the District Valuation Officer for proper valuation for the purposes of assessment under section 153A. It was in this backdrop that a reference was made to the District Valuation Officer for valuation of land and building at 21/31 Mall Road, Delhi. On the basis of DVO's report so obtained by the Assessing Officer, the differences in valuation were as follows:
| Assessment year | Description | As declared by assessee (Rs) | As valued by the DVO (Rs) | Difference |
| 2005-06 | FMV of land | 1,00,00,000 | 5,37,12,796 | 4,37,12,796 |
| 2005-06 | Construction | 49,43,492 | 62,28,735 | 12,85,243 |
| 2006-07 | Construction | 54,55,916 | 68,74,384 | 14,18,468 |
| 2007-08 | Construction | 21,23,192 | 26,75,194 | 5,52,002 |
3. It was on the basis of this DVO report, and after rejecting assessee's specific objections to the contents of this valuation on merits, that the Assessing Officer concluded as follows:
In view of the details as elaborated in the sub paras above, I am constrained to consider the difference in the value of investment in land and building as valued by the DVO under section 142 A of the Act, and that shown by the assessee in his books, as the undisclosed expenditure of the assessee under section 69C of the Act, and to add it to his returned income in the year as traced out by the DVO, and considered appropriate at this end too, as follows:
| Relevant assessment year | Amount considered under section 69C of the Income Tax Act [Rs] |
| 2005-06 | 4,49,98,039 |
| 2006-07 | 14,18,468 |
| 2007-08 | 5,52,002 |
4. Aggrieved by the stand so taken by the Assessing Officer, assessee carried the matter in appeal before the CIT(A). While learned CIT(A) held that the reference to the DVO under section 142 A was invalid inasmuch as it could only be made for the purposes of 68, 69 A and 69 B, no such reference was permissible, in accordance with the law as it then stood, for the purpose of making an addition under section 69 C. As the entire addition was made under section 69C and on the basis of the DVO, learned CIT (A) deleted the additions, referred to above, having been made by the Assessing Officer. Learned CIT(A) also dealt with the valuation issues on merits, but given the fact that all the relevant additions were anyway deleted on account of impermissibility of reference under section 142A, that aspect of the matter is somewhat academic. Both the parties are in appeal before us. While revenue is aggrieved of the relief having been granted by the CIT(A) on the issue of impermissibility of reference under section 142A in a situation in which additions are made under section 69 C as also on certain findings on merits, the assessee is aggrieved, for the assessment year 2005-06, on not accepting certain arguments with regard to valuation of land on merits.
5. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position.
6. We have noted that learned Commissioner (Appeals) has quashed the reference under section 142A on the short ground that no such reference is permissible so far as additions in the hands of an assessee under section 69C are concerned and the Assessing Officer has, in the present case, made the impugned additions under section 142 A of the Act. It is , therefore, appropriate begin by taking a look these provisions, i.e. section 69 C and Section 142 A, and other relevant legal provisions, i.e. Section 69 as they stood at the material point of time. These provisions are reproduced below for ready reference:
Section 69- Unexplained investments.
Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year. Unexplained money, etc.
Section 69A- Unexplained money
Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee of such financial year.]
Section 69B- Amount of investments, etc., not fully disclosed in books of account.
Where in any financial year the assessee has made investments or is found to be the owner of any bullion, jewellery, or other valuable article, and the Assessing Officer finds that the amount expended on making such investments or in acquiring such bullion, jewellery or other valuable article exceeds the amount recorded in this behalf in the books of account maintained by the assessee for any source of income, and the assessee offers no explanation about such excess amount or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the excess amount may be deemed to be the income of the assessee for such financial year.
Section 69C- Unexplained expenditure, etc.
Where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the opinion of the Assessing Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year:
Provided that, notwithstanding anything contained in any other provision of this Act, such unexplained expenditure which is deemed to be the income of the assessee shall not be allowed as a deduction under any head of income.
Section 142A- Estimate by Valuation Officer in certain cases
Provided that nothing contained in this section shall apply in respect of an assessment made on or before the 30th day of September, 2004, and where such assessment has become final and conclusive on or before that date, except in cases where a reassessment is required to be made in accordance with the provisions of section 153A.
Explanation: In this section, "Valuation Officer" has the same meaning as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957).
7. We have also noticed that there is no dispute that in the present case, the assessee had made payments in respect of acquisition of land and constructions thereon for a residential unit, and the case of the Assessing Officer is that his investment in the residential unit was not properly reflected in the books of accounts. As the Assessing Officer himself considered "the difference in the value of investment in land and building as valued by the DVO under section 142 A of the Act, and that shown by the assessee in his books" as income of the assessee but he has treated the same "as the undisclosed expenditure of the assessee under section 69C of the Act". However, as a plain look at the provisions of section 69 C and Section 69B shows that while section 69 C refers to "any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the opinion of the Assessing Officer, satisfactory", Section 69B refers to a situation in which "investments or is found to be the owner of any bullion, jewellery, or other valuable article, and the Assessing Officer finds that the amount expended on making such investments or in acquiring such bullion, jewellery or other valuable article exceeds the amount recorded in this behalf in the books of account maintained by the assessee for any source of income, and the assessee offers no explanation about such excess amount or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory". Clearly, therefore, any expenditure on investment in land and building, particularly in a situation in which the same is held as an investment, not having been fully disclosed in the books of accounts is covered by the specific provisions of Section 69B of the Act. The reference to Section 69C, as made by the Assessing Officer, in the concluding portion of the assessment order seems to be an inadvertent error. The addition in question, if otherwise sustainable in law on merits, could only be sustained under section 69B of the Act. There can be little dispute about this legal position. A careful look at Section 142A also makes it clear that the section under which addition is made not relevant for assumption of jurisdiction under that section, but all such a reference requires is that "where an estimate of the value of any investment referred to in section 69 or section 69B or the value of any bullion, jewellery or other valuable article referred to in section 69A or section 69B or fair market value of any property referred to in sub-section (2) of section 56", a reference can be made to the DVO. As long as estimation of value of "an investment referred to in Section 69B" is required, the reference can be legitimately made under section 142A. Section 69 B, on the other hand, refers to "bullion, jewellery or other valuable article" (emphasis by underling supplied by us) which essentially includes land and building as well. In this view of the matter, in our considered view, learned CIT(A) has acted in a rather superficial manner, proceeding on the basis of an ill-conceived technicality, and quashed the reference under section 142A on the ground that such a reference could only be made in respect of an addition under section 69 C of the Act. Learned CIT (A) was, therefore, wholly in error in his reasoning and in his conclusions.
8. Learned counsel for the assessee, however, does not give up. He refers to a judgment of Hon'ble jurisdictional High Court, in the case of Commissioner Of Income-Tax v. Aar Pee Apartments P. Ltd. [2009] 319 ITR 276/[2010] 188 Taxman 39 (Delhi) in support of the proposition that even in respect of expenditure on construction, a reference under section 142 A cannot be made as it is expenditure nevertheless. However, this decision does not support the case of the assessee inasmuch as that was a case in which a builder had incurred expenditure in the course of his business and Hon'ble High Court was of the view that, "if investments could include within its fold the expenditure as well which is incurred by a businessman during the course of his business, there was no necessity of having a separate provision under s. 69C of the Act which deals with unexplained 'expenditure'". In the present case, however, the expenditure is not in the course of business but as an investment in personal capacity. He then refers to Hon'ble jurisdictional High Court's judgment in the case of Commissioner Of Income Tax v. Naveen Gera [2010] 328 ITR 516/[2011] 198 Taxman 93 (Delhi) (Mag.) but nothing really turns on this decision as the reference under section 142 A was held to be impermissible because "the assessment was made by the AO on 30th Aug., 2000 and the CIT(A) decided the appeal on 30th Jan., 2001, which is clearly prior to the cut off date of 30th Sept., 2004. Consequently, it was not open to the AO to order valuation of the property by DVO". A reference was then made to Hon'ble Supreme Court's judgment in the case of Sargam Cinema, Haldwani v. Commissioner Of Income Tax, Haldwani. [2010] 328 ITR 513/[2011] 197 Taxman 203 in support of the proposition that unless the books of accounts were rejected, a reference cannot anyway be made to the DVO. However, as is obvious from the judgment, the relevant appeal before the Hon'ble Court was filed in the year 2005, and, therefore, the assessment, in all likelihood, must have been completed before 30th September 2004 which was the cut-off date so far as provisions of Section 142A coming into force is concerned. While the insertion of Section 142A was retrospective in effect, as was specifically stated, the proviso to Section 142 A specifically stated that, "nothing contained in this section shall apply in respect of an assessment made on or before the 30th day of September, 2004, and where such assessment has become final and conclusive on or before that date, except in cases where a reassessment is required to be made in accordance with the provisions of section 153A". The assessments dealt in Sargam Cinema's case (supra), as can be reasonably be inferred, did not deal with the impact of Section 142A. In the absence of provision of Section 142A, there was no enabling provision to make a reference to the DVO, and, as such, judicial precedents in the context of law prior to insertion of Section 142A are no longer relevant. In our considered view, post insertion of Section 142A, rejection of the books of accounts is not a sine qua non for a reference being made to the DVO, even though a DVO report, for the purposes of making an assessment of income, is to be examined on its merits in each case and just because a DVO's report indicates higher investment than the investment in the books of accounts, such a fact, by itself, cannot justify an addition being made in that respect. We hold so.
9. In view of the above discussions, we consider it appropriate to vacate the order of the CIT(A) on the point of DVO reference being invalid. However, as we have mentioned earlier, the DVO report is to be examined on its merits and all the objections raised by the assessee thereto are required to be adjudicated on merits. Learned CIT(A), as learned representatives fairly agree, has not examined all these contentions, as also elaborate documentary support thereof-copies of which have been filed before us as well, in sufficient detail and by way of a speaking order. With the consent of the parties, therefore, the matter is restored to the file of the CIT(A) for the limited purposes of adjudication de novo on merits on the impugned additions, in respect of investment in land and building, in accordance with the law, after giving yet another opportunity of hearing to the assessee and by way of a speaking order. We also make it clear that the assessee will have the liberty to take all such pleas in support of his contentions on merits, as he deems fit, and the CIT(A) will deal with all such contentions as well, in terms of the above directions. In the appeal filed by the assessee, the primary grievance is that the CIT(A) has not dealt with all the grounds of appeal of the assessee. As the matter is being remitted to the file of the CIT(A), we also deem it proper to direct the CIT(A) to adjudicate on all the grounds raised by the assessee, in accordance with the law, after giving yet another opportunity of hearing to the assessee and by way of a speaking order.
10. As we part with these appeals, we make it clear that in the present appeals we have dealt with the Section 142 A, as it stood at the material point of time i.e. in the assessment years 2005-06, 2006-07 and 2007-08, but in the law as it stands now, by the virtue of amendment vide Finance Act 2014, the legal position is different and the issues dealt in this appeal do not even arise for consideration. We leave it at that.
11. In the result, all the four appeals are allowed for statistical purposes in the terms indicated above.
RANJAN
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