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2005 DIGILAW 161 (PNJ)

Commissioner Of Income Tax v. Ganesh Rice Mills

2005-01-31

N.K.SUD, SATISH KUMAR MITTAL

body2005
Judgment N.K.Sud, J. 1. At the instance of the Revenue, the Income-tax Appellate Tribunal, Chandigarh Bench, Chandigarh (for short the Tribunal), has referred the following questions of law arising out of its order dt. 31st Jan., 1994 relating to asst. yr. 1983-84, for the opinion of this Court : "1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in deleting the addition of Rs. 2,42,577 made on account of difference in the valuation of property arrived at by the DVO and that declared by the assessee in its books of account ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in deleting the addition on technical ground that the books of the assessee were not rejected without discussing the merits of the valuation report ? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was right on facts and law in considering the irrelevant facts and ignoring the relevant facts of the case ?" 2. Assessee has constructed the factory building during the financial years 1982-83 to 1985-86. The cost of construction as per books of account was as under : 196-MK..ek.htm The AO had referred the case for valuation to the DVO, who valued the same at Rs. 5,60,200. Since there was difference of Rs. 2,71,360 between the cost of construction shown by the assessee and the cost of construction determined by the DVO, the assessee was called upon to explain the difference. The assessee raised various objections to the report of the DVO which were overruled by the AO, who made an addition of Rs. 2,71,360 on account of unexplained investment. In the assessment order, the original figure was adopted at Rs. 3,71,630 due to a mistake which was rectified and the figure reduced to Rs. 2,71,630. 3. On appeal by the assessee, the CIT(A) gave a relief of Rs. 29,053 on account of builders efforts and self-supervision and thereby upheld the addition of Rs. 2,42,577. 4. The assessee preferred further appeal to the Tribunal which has been allowed and the entire addition deleted. The Tribunal has upheld the objection of the assessee that since it was maintaining regular books of account in respect of cost of construction, no addition could be made without pointing out any defect in the same. 2,42,577. 4. The assessee preferred further appeal to the Tribunal which has been allowed and the entire addition deleted. The Tribunal has upheld the objection of the assessee that since it was maintaining regular books of account in respect of cost of construction, no addition could be made without pointing out any defect in the same. The Tribunal has also noted the fact that the accounts of the assessee were duly audited and no defect in the same had been pointed out by the AO. 5. The apex Court, in Smt. Amiya Bala Paul V/s. CIT (2003) 262 ITR 407 (SC), has held that the DVO cannot be called upon to give a report to the AO under the Act except when a reference under Section 55A or 269L of the IT Act, 1961, is made. The AO, therefore, could not have obtained report of the DVO for the purpose of determining the cost of construction. Thus, the report of the DVO was clearly invalid. If the said report is excluded from consideration, there is no material, whatsoever, warranting any addition on account of unexplained investment. Thus, the conclusion of the Tribunal has to be sustained on this ground alone. 6. In this view of the matter, we do not deem it necessary to go into the other aspects of the matter on the basis of which relief has been allowed by the Tribunal. 7. In view of the above, we reformulate the question as under : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in deleting the addition of Rs. 2,42,577 on account of unexplained investment in the cost of construction of factory building ?" The above question is answered in the affirmative i.e., in favour of the assessee and against the Revenue. No costs.