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citation codes

Case Number

ITA 4903/DEL/2019

Attorney(S)

Acts

u/s 143(2) of the Income-tax Act, 1961, hereinafter referred

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Summary of Opinion: ITA No. 4903/Del/2019 — Toffee Agricultural Farms P. Ltd. Vs. ITO (Assessment Year 2006-07)

Factual and Procedural Background

The assessee, M/s Toffee Agricultural Farms Pvt. Ltd., filed its return of income on 29.11.2006 declaring nil income. The case was selected for scrutiny and the Assessing Officer (AO) issued a notice under section 143(2) of the Income-tax Act, 1961. During assessment the AO noticed that the assessee had purchased two tracts of land in the same village for Rs. 22,21,000 and Rs. 15,44,000 respectively, whereas the stamp duty values (amounts used for stamp duty) were Rs. 34,58,000 and Rs. 23,69,000 respectively, indicating purchases below circle rates.

The AO referred the issue of valuation of the agricultural land to the Valuation Officer (DVO) under section 142A of the Act. The DVO estimated the value of the land to be less than 10% of the value adopted by the Stamp Valuation Authority. On this basis the AO treated the difference of Rs. 14,79,300 as unexplained expenditure and made an addition under section 69C of the Act.

The assessee appealed to the Commissioner of Income-tax (Appeals) [CIT(A)], who dismissed the appeal. The CIT(A) construed the addition as being under section 69B (rather than 69C) and sustained the addition. The assessee challenged the CIT(A)'s order before the Income Tax Appellate Tribunal (ITAT), Delhi Bench ("SMC"), which delivered the impugned opinion dated 18 April 2022.

Legal Issues Presented

Whether the reference to the DVO under section 142A of the Act was valid when the Assessing Officer framed the addition under section 69C (given that section 142A explicitly refers to sections 69 and 69B but conspicuously excludes section 69C)?
Whether the CIT(A) had the power to substitute or treat an addition made by the AO under section 69C as an addition under section 69B without giving specific notice or opportunity to the assessee?
Whether the addition of Rs. 14,79,300 as unexplained expenditure under section 69C (based on the DVO report) was sustainable in view of the alleged invalidity of the reference and/or the procedural defects alleged by the assessee?

Arguments of the Parties

Appellant's (Assessee's) Arguments

The reference to the DVO under section 142A was not valid for the purpose of section 69C because section 142A refers to sections 69 and 69B (and to sections 69A/69B for bullion/jewellery) but specifically excludes section 69C; therefore the reference was bad in law (relying principally on CIT Vs. Aar Pee Apartments (P) Ltd., 319 ITR 276).
The Assessing Officer did not make adequate inquiry to ascertain the correct fair market value; reliance was placed on authority(s) to support the proposition that failure to make inquiry vitiates assessment (counsel relied on CIT Vs. Lubtech India Ltd. (2009) 311 ITR 175 (Del)).
The learned CIT(A) arbitrarily replaced or re-characterized the addition made under section 69C as being under section 69B without providing the assessee an opportunity or specific notice of such substitution, thereby effectively assessing a different provision/new source not part of the assessment order (relying on several decisions including CIT Vs. Sardari Lal & Co., CIT Vs. Union Tyres, CIT Vs. Naresh Khattar (HUF), Smt. Sarika Jain Vs. CIT and others).
Various case laws and a Tribunal decision were cited to support the propositions above and to argue that the CIT(A) was not justified in invoking section 69B when the AO had invoked section 69C.

Respondent's (Revenue's) Arguments

The Revenue contended that the reference to section 69C in the assessment order was a mistake in terminology and such an error would not vitiate the proceedings; the AO was dealing with the substance of the issue (investment in immovable property) and the CIT(A) correctly construed the addition as being under section 69B.
The Revenue submitted that the case laws relied upon by the assessee were distinguishable on facts and circumstances of the present case.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
CIT Vs. Aar Pee Apartments (P) Ltd., 319 ITR 276 (Delhi High Court)	Interprets section 142A(1): legislature expressly referred to sections 69, 69A and 69B and specifically excluded section 69C; principle of casus omissus applies — court cannot read into the statute what legislature excluded; remedy lies in amendment, not interpretation.	The Tribunal expressly followed this Jurisdictional High Court decision. Relying on it, the Tribunal held that reference to the DVO under section 142A for the purpose of section 69C was invalid and set aside the impugned order; the addition made under section 69C was deleted.
CIT Vs. Lubtech India Ltd., (2009) 311 ITR 175 (Del)	Relied upon for the proposition that failure by assessing authority to make appropriate inquiry may vitiate the assessment.	Noted by the Tribunal as a case relied upon by the assessee to contend that absence of inquiry can vitiate assessment. The Tribunal's decision focused on section 142A exclusion and substitution by the CIT(A).
Dinesh Kumar Mittal Vs. ITO, (1992) 193 ITR 770 (All)	Relied upon by the assessee as supporting authority (specific principle cited in the opinion: cited in support of the assessee's contentions regarding validity of proceedings/inquiries).	Referenced in the assessee's submissions; the Tribunal recorded the reliance but the opinion primarily followed the Aar Pee decision on the section 142A point.
CIT Vs. Sardari Lal & Co., (2001) 251 ITR 864 (Delhi)	Relied upon by the assessee to contend limits on re-characterisation/substitution of provisions by appellate authorities.	Recorded as one of the authorities relied upon by the assessee to argue that the CIT(A) could not replace section 69C with section 69B without notice; the Tribunal upheld the assessee's contention on this point in line with the Aar Pee reasoning.
CIT Vs. Union Tyres, (1999) 240 ITR 556 (Del)	Relied upon by the assessee in support of the general contention against improper substitution of provisions.	Noted by the Tribunal as among the precedents cited by the assessee; the Tribunal's operative reasoning and decision was based on the exclusion in section 142A and the Aar Pee decision.
CIT Vs. Naresh Khattar (HUF), 261 ITR 664 (Del)	Relied upon by the assessee in support of procedural/legal contentions regarding re-characterisation of additions.	Referenced in the assessee's submissions; Tribunal's decision did not hinge solely on this precedent but recognized it among the authorities relied upon.
Smt. Sarika Jain Vs. CIT, (2017) 84 Taxmann.com 64 (All)	Relied upon to buttress the contention that CIT(A) was not justified in invoking section 69B when AO invoked section 69C.	Recorded as relied upon by the assessee; Tribunal's decision aligned with the assessee's contention on invalid referral/substitution, following Aar Pee.
Tribunal decision: Hari Mohan Sharma, ITA No. 2953/Del/2018 (Tribunal)	Invoked for the proposition that the words "enhance the assessment" are confined to the assessment reached through a particular process (as referenced by the assessee).	Referenced by the assessee; the Tribunal recorded the reliance but based its dispositive order on the statutory construction of section 142A and the Aar Pee High Court decision.

Court's Reasoning and Analysis

The Tribunal (Judicial Member Kul Bharat) examined the procedural and statutory matrix and the rival submissions. The Tribunal made the following step-by-step analysis based strictly on the material and authorities referenced in the opinion:

It was undisputed that the AO's assessment order recorded the addition as unexplained expenditure under section 69C and that the AO had made a reference to the DVO under section 142A of the Act.
The Tribunal parsed section 142A and noted that subsection (1) of section 142A refers to obtaining a report from a valuation officer to ascertain the value of any investment referred to in section 69 or section 69B, and the value of bullion, jewellery or other valuable articles referred to in sections 69A or 69B. The Tribunal observed that section 69C is conspicuously excluded from that list.
The Tribunal accepted the legal principle (as articulated in the Jurisdictional High Court decision in CIT Vs. Aar Pee Apartments) that where legislature has expressly referred to certain provisions and excluded others, the doctrine of casus omissus applies and courts cannot read into the statute what the legislature has deliberately omitted. The proper remedy for such an omission is legislative amendment, not judicial interpretation.
Applying that principle, the Tribunal concluded that a reference to the DVO under section 142A for the purpose of section 69C was not valid. The Tribunal found merit in the assessee's contention that the AO was not empowered to refer the matter to the DVO under section 142A for the purposes of section 69C.
The Tribunal then addressed the action of the CIT(A) who, in the appellate order, treated or construed the addition made under section 69C by the AO as having been made under section 69B. The Tribunal analysed the powers of the CIT(A) under sections 250 and 251 of the Act: while the CIT(A) may make further inquiries or direct assessments to be enhanced/reduced/annulled in appeal, there was no statutory power enabling the CIT(A) to change the provision of law applicable to a specific item without giving specific notice to the assessee.
The Tribunal noted that the Revenue had not shown that the assessee was put on notice by the CIT(A) before effecting such a change. Consequently, in the Tribunal's view, the CIT(A) could not validly treat an addition made under section 69C as an addition under section 69B.
On the combined basis of the invalidity of the reference to the DVO under section 142A for section 69C and the absence of power/notice for the CIT(A) to substitute 69B for 69C, the Tribunal found that the addition made under section 69C on the basis of the DVO report did not deserve to stand.

Holding and Implications

Holding: The Tribunal allowed the assessee's appeal and set aside the impugned order. The Tribunal deleted the addition of Rs. 14,79,300 made by the Assessing Officer under section 69C (the addition based on the DVO report was deleted).

Implications:

Direct effect on the parties: The specific addition of Rs. 14,79,300 treated as unexplained expenditure under section 69C was deleted and the grounds of appeal taken by the assessee were allowed.
The Tribunal's decision followed the binding Jurisdictional High Court precedent (CIT Vs. Aar Pee Apartments) on the statutory construction of section 142A and did not purport to create a new principle of law beyond applying that precedent.
No broader or novel precedent was announced by the Tribunal beyond applying the cited authorities; the Tribunal emphasised that the remedy for any legislative omission would lie with the legislature and not by judicial interpretation.

Order pronounced in open Court on 18 April 2022. Judicial Member: Kul Bharat.

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Toffee Agricultural Farms Pvt. Ltd., New Delhi v. ITO WARD - 25(3), New Delhi

ITA no. 4903/Del/2019 Toffee Agricultural Farms P. Ltd. Vs. ITO IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH "SMC": NEW DELHI

BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER

ITA No. _4903/DEL/2019

[Assessment Year: 2006-07]

M/s Toffee Agricultural Farms Pvt. Ltd. 67, Friends Colony, New Delhi-110065 PAN- AACCT3058J	Vs	Income-tax Officer, Ward 25(3), New Delhi
APPELLANT		RESPONDENT
Appellant by	Sh. Anil Bhalla, CA
Respondent by	Sh. Anil Kumar Sharma, Sr. DR
Date of hearing	14.02.2022
Date of pronouncement	18.04.2022

O R D E R

PER KUL BHARAT, JM:

This appeal, by the assessee, is directed against the order of the learned Commissioner of Income-tax (Appeals)-33, New Delhi, dated 22.02.2019, pertaining to the assessment year 2006-07. The assessee has raised following grounds of appeal:

"1 The learned CIT(A) has erred both on facts and in law in sustaining the addition of Rs. 14,79,300 albeit under section 69B of the Act. The learned CIT(A) further erred in sustaining Section 69B of the Act for Section

Toffee Agricultural Farms P. Ltd. Vs. ITO 69C of the Act applied by the Assessing officer while making the impugned addition.

1.1 The learned CIT(A) has erred both on facts and in law in not

providing opportunity to the company when substituting section 69B of the Act for Section 69C of the Act, for sustaining the addition of Rs. 14,79,300 made by the assessing officer by applying Section 69C of the Act.

2 The learned Commissioner of Income Tax (Appeals) has erred both on facts and in law in not providing sufficient opportunity of being heard to the assessee company in re-characterizing the additions made by the learned Assessing Officer in his assessment order dated _____.

3 The learned Commissioner of Income Tax (Appeals) has erred both on facts and in law in confirming the addition by ignoring the fact that referring the matter to DVO by learned AO is incorrect in law and report obtained in this respect cannot form basis of addition u/s 69C of the Act."

2. Facts giving rise to the present appeal are that the assessee filed its return of income on 29.11.2006, declaring 'Nil' income. The case was selected for scrutiny and a notice u/s 143(2) of the Income-tax Act, 1961, hereinafter referred to as the

"Act", was issued. In response thereto the authorized representative of the assessee attended the proceedings. The Assessing Officer noticed that during the year under consideration the assessee had purchased two tracts of land in the same village for Rs. 22,21,000 and Rs. 15,44,000 respectively, whereas the stamp duty paid on amount of Rs. 34,58,000 and 23,69,000 respectively. Hence the assessee had purchased land below the circle rate. Thereafter, the Assessing Officer referred the issue of valuation of agricultural land in question to the Valuation Officer (DVO).

Toffee Agricultural Farms P. Ltd. Vs. ITO The DVO after considering the facts and circumstances estimated the value of the land less than 10% of the value adopted by the Stamp Valuation Authority. The

Assessing Officer, therefore, proceeded to treat the difference of Rs. 14,79,300/- as

unexplained expenditure u/s 69C of the Act. Aggrieved against this the assessee

preferred appeal before the learned CIT(Appeals), who after considering the

submissions dismissed the appeal. Aggrieved against this the assessee is in appeal

before this Tribunal.

3. Learned counsel for the assessee submitted that the orders of the authorities

below are unjust, arbitrary and against the principles of law. He submitted that in the present case the Assessing Officer had made assessment u/s 69C of the Act and he had referred the matter to DVO U/s 142A of the Act. He contended that the reference u/s 142A can be made for the purpose of ascertaining the correct value of investment referred to in section 69 or 69B. However, Section 69C is not mentioned in the proviso. He placed reliance on the judgment of Hon'ble Delhi High Court rendered in the case of CIT Vs. Aar Pee Apartments (P) Ltd. 319 ITR 276 to buttress the contention that reference is bad in law. Learned counsel further submitted that even otherwise also the Assessing Officer did not make any inquiry regarding the correct fair market value of the land. In support of the contention that if inquiry is not made by the assessing authority the assessment is vitiated, learned

Toffee Agricultural Farms P. Ltd. Vs. ITO counsel for the assessee has placed reliance on the judgment of the Hon'ble Delhi High Court rendered in the case of CIT Vs. Lubtech India Ltd. (2009) 311 ITR 175

(Del). Further reliance was placed on the judgment of the Hon'ble Allahabad High

Court rendered in the case of Dinesh Kumar Mittal Vs. ITO (1992) 193 ITR 770

(All). He further submitted that the learned CIT(Appeals) to fill the legal lacuna,

regarding assessment made u/s 69C, arbitrarily replaced Section 69B in place of

Section 69C, as mentioned in the assessment order. Therefore, he submitted that

the action of the learned CIT(Appeals) tantamount to assess a new source of

income not forming part of the assessment order. Learned counsel for the assessee

placed reliance on the judgment of the Hon'ble Delhi High Court rendered in the

case of CIT Vs. Sardari Lal & Co. (2001) 251 ITR 864. Further reliance was

placed on the decision of Hon'ble Delhi High Court in the case of CIT Vs. Union

Tyres (1999) 240 ITR 556 (Del). Further reliance was placed on the judgment of

the Hon'ble Delhi High Court in the case of CIT Vs. Naresh Khattar (HUF) 261

ITR 664. He further placed reliance on the decision of Hon'ble Allahabad High

Court rendered in the case of Smt. Sarika Jain Vs. CIT (2017) 84 Taxmann.com

64 (All) to buttress the contention that the learned CIT(Appeals) was not justified

in invoking the provisions of Section 69B when the Assessing Officer had invoked

the provisions of Section 69C of the Act. Learned counsel also placed reliance on

the decision of the Tribunal rendered in the case of Hari Mohan Sharma rendered

Toffee Agricultural Farms P. Ltd. Vs. ITO in ITA No. 2953/Del/2018 to buttress the contention that the words "enhance the assessment" are confined to the assessment reached through a particular process.

4. The learned DR opposed the submissions and supported the orders of the

authorities below. He submitted that merely because there was an error in writing Section 69C by the Assessing Officer, would not vitiate the entire proceedings. The Assessing Officer was dealing in substance with the subject matter relating to the investment made by the assessee in immovable property. He submitted that by mistake the Assessing Officer has stated Section 69C, that has been correctly construed to be Section 69B by the learned CIT(Appeals). He submitted that the case laws relied by the learned counsel for the assessee, are distinguishable on facts and circumstances of the present case.

5. I have heard rival submissions, perused the material available on record and gone through the orders of authorities below. The objection of the assessee regarding erroneous reference to the DVO, it was submitted that the Assessing Officer was not empowered to refer the matter to DVO, where the assessment was being made u/s 69C of the Act. In support of this contention, learned counsel for the assessee has placed reliance on various case laws. There is no dispute with regard to the fact that the Assessing Officer in the assessment order has stated addition regarding unexplained expenditure u/s 69C of the Act. The Revenue has not brought on record that mentioning of Section 69C was on account of any

Toffee Agricultural Farms P. Ltd. Vs. ITO typographical error. It is also clear from the assessment order that the Assessing Officer had referred the issue of market value of the property in question u/s 142A

of the Act. However, as per Section 142A such reference can be made to ascertain

the value of any investment referred to in Section 69 or Section 69B or the value of

any bullion, jewellery or any other valuable article referred to in section 69A or

Section 69B of the Act. There is conspicuous exclusion of Section 69C. In the

present case, reference u/s 142A was not made regarding ascertaining the correct

market value of the investment in property. But, it was in fact for the purpose of

ascertaining expenditure which the assessee made on the purchases. I find merit

into the contention of the assessee that the reference to DVO u/s 142A for the

purpose of Section 69C is not valid.

6. Now coming to the question regarding action of the learned CIT(Appeals) to

treat the reference u/s 142 for the purpose of Section 69B, I find merit into the contention of the assessee that there is no power conferred upon the learned CIT(Appeals) to assess a particular item under different provision of the Act what the Assessing Officer had done without giving a specific notice to the assessee regarding such action. The Revenue has not brought any material to suggest that the assessee was put to notice by the learned CIT(Appeals) before taking such action. I am of the considered view that law does not permit for such change of provision of law. As per Section 250 of the Act, the learned CIT(Appeals) is

Toffee Agricultural Farms P. Ltd. Vs. ITO empowered to make further inquiry as he thinks fit or may direct the Assessing Officer to make further inquiry and report to the learned CIT(Appeals). As per

Section 251(1)(a), in appeal against an order of assessment, he may confirm,

reduce, enhance or annul the assessment, but there is no such power provided by

the law that learned CIT(Appeals) could change the provision of law qua the item

of which assessment was made. Therefore, in the absence of such power, learned

CIT(Appeals) could not have treated the addition made u/s 69C as the addition

made u/s 69B and the same is contrary to the spirit of the Act. Reliance placed by

the learned counsel for the assessee on the judgment of the Hon'ble Delhi high

Court, rendered in the case of CIT Vs. Aar Pee Apartments (P) Ltd. (supra), has

held that from the reading of sub-section (1) of Section 142A, it is clear that

legislature referred to the provisions of Section 69, 69A and 69B but specifically

excluded 69C. The principle of casus omissus becomes applicable in a situation

like this. What is not included by legislature and rather specifically excluded,

cannot be interpreted by the Court through the process of interpretation. The only

remedy is to amend the provision. It is not the function of the Court to legislate or to plug the loopholes in the law. In the light of the above binding precedent the

action of the learned CIT(Appeals) in treating the addition made by the Assessing

Officer u/s 69C as have been made u/s 69B is contrary to the law laid down by the

Hon'ble Jurisdictional High Court. I, therefore, respectfully following the decision

Toffee Agricultural Farms P. Ltd. Vs. ITO of the Hon'ble Jurisdictional High Court in the case of CIT Vs. Aar Pee Apartments (P) Ltd. (supra), the impugned order is therefore set aside. The

addition made u/s 69C on the basis of the report of the DVO by the Assessing

Officer deserves to be deleted. Hence, impugned addition is hereby deleted.

Grounds of appeal taken by the assessee are allowed accordingly.

7. In the result, assessee's appeal is allowed.

Order pronounced in open Court on 18^th April, 2022.

Sd/-

(KUL BHARAT)

JUDICIAL MEMBER *MP* Copy forwarded to:

1. Appellant

2. Respondent

3. CIT

4. CIT(Appeals)

5. DR: ITAT

ASSISTANT REGISTRAR

ITAT, NEW DELHI

Toffee Agricultural Farms Pvt. Ltd., New Delhi v. ITO WARD - 25(3), New Delhi

Summary of Opinion: ITA No. 4903/Del/2019 — Toffee Agricultural Farms P. Ltd. Vs. ITO (Assessment Year 2006-07)

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Appellant's (Assessee's) Arguments

Respondent's (Revenue's) Arguments

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Toffee Agricultural Farms Pvt. Ltd., New Delhi v. ITO WARD - 25(3), New Delhi

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