Whether On The Facts And Circumstances Of The Case Thehon'ble Itat Was Justified In Relying The Judgements In The Caseof Cit v. Of The Assessment Was Already In Existence On Account Ofincriminating Material Collected As A Result Of Search?

Court No. - 35 Case :- INCOME TAX APPEAL No. - 382 of 2010 Appellant :- Commissioner Of Income Tax Central KanpurRespondent :- M/S Gopi ApartmentsCounsel for Appellant :- S.C./A.N.Mahajan,Ashok Kumar,Gaurav MahajanCounsel for Respondent :- S.K. Garg,A. Bansal With Case :- INCOME TAX APPEAL No. - 148 of 2014 Appellant :- Commissioner Of Income Tax CentralRespondent :- M/S Gopi ApartmentsCounsel for Appellant :- Ashok Kumar Sr. S.C.,Bharat Ji Agrawal,Gaurav MahajanCounsel for Respondent :- S.K.Garg And Case :- INCOME TAX APPEAL No. - 126 of 2014 Appellant :- Commissioner Of Income Taxcentral KanpurRespondent :- M/S Gopi ApartmentsCounsel for Appellant :- Bharat Ji Agrawal,Gaurav Mahajan,S.S.C. I.T. Counsel for Respondent :- S.K. Garg,Ashish Bansal Hon'ble Bharati Sapru,J.Hon'ble Piyush Agrawal,J. (Delivered by Hon'ble Piyush Agrawal, J.) These three Income Tax Appeals, i.e., Income Tax Appeal No. 382 of 2010, Income Tax Appeal No. 148 of 2014 and Income Tax Appeal No. 126 of 2014, have been heard together and are being disposed of by thiscommon order. Income Tax Appeal No. 382 of 2010 isbeing taken up as a leading case. The present appeal has been preferred under section 260 (A) of the Income Tax Act, 1961 against thejudgement & order dated 28.06.2010 passed by theIncome Tax Appellate Tribunal, Lucknow Bench “A”,Lucknow (hereinafter referred to as, 'the Tribunal') inIncome Tax Appeal No. 75(Luc.)/2010 for theAssessment Year 2007-08. The present appeal was admitted by this Court on 27.02.2013 on the following questions of law: “1. Whether on the facts and circumstances of the case theHon'ble ITAT was justified in law in quashing the assessmentholding that reference to the DVO was made when no assessmentproceedings was pending ignoring that notice u/s 153C for thesearch assessment had already been issued at the time ofreference to the DVO? 2. Whether on the facts and circumstances of the case theHon'ble ITAT was justified in law in quashing the assessmentwithout giving any reason for the same? 3. Whether on the facts and circumstances of the case theHon'ble ITAT was justified in relying the judgements in the caseof CIT Vs. Uniya Co-operative Housing Society Ltd. (2009) 314ITR 272 & ITO VS. Vijeta Educational Society (2009) 118 ITD382 (ITAT, Lucknow Bench 'B') where the assessing Officer hasutilized the information gathered on account of valuation reportto reopen the case u/s 148 while in the instant case the pendency of the assessment was already in existence on account ofincriminating material collected as a result of search? 4. Whether on the facts and circumstances of the case theHon'ble ITAT was justified in law in quashing the assessmenteven though the assessment has been framed after issue of avalid notice u/s 143(2) of the Act. Even if it was considered thatreference was invalid, the Hon'ble ITAT could have only deletedthe additions made on the basis of such valuation report. Theassessment proceeding do not get vitiated as they are initiated byissue of notice u/s 143(2) and not by a reference to DVO u/s142A? 5. Whether Hon'ble ITAT was justified in traveling beyond thescope of section 253 of the I.T. Act which prescribes orders whichmay be appealed against by an appellate before the Hon'bleTribunal. A reference to valuation cell is neither an order of theAssessing Officer nor included in the orders passed by theAssessing Officer as mentioned in provisions of section 253(1)(b)of the Act? 6. The Hon'ble ITAT has thus, with due respect, exceeded itsjurisdiction and assumed writ jurisdiction vested in the Hon'bleHigh Court under section 226 of the Income Tax Act. Hon'bleITAT being a creature of the Income Tax Act is bound by thepowers and limitation imposed by the Income Tax Act asprescribed in Part B of Chapter XX of the Income Tax Actdealing with appeals to the Tribunal.” 5. Whether Hon'ble ITAT was justified in traveling beyond thescope of section 253 of the I.T. Act which prescribes orders whichmay be appealed against by an appellate before the Hon'bleTribunal. A reference to valuation cell is neither an order of theAssessing Officer nor included in the orders passed by theAssessing Officer as mentioned in provisions of section 253(1)(b)of the Act? 6. The Hon'ble ITAT has thus, with due respect, exceeded itsjurisdiction and assumed writ jurisdiction vested in the Hon'bleHigh Court under section 226 of the Income Tax Act. Hon'bleITAT being a creature of the Income Tax Act is bound by thepowers and limitation imposed by the Income Tax Act asprescribed in Part B of Chapter XX of the Income Tax Actdealing with appeals to the Tribunal.” We have heard Shri Gaurav Mahajan, learnedcounsel for the Revenue and Shri Ashish Bansal,learned counsel for the respondent – assessee. The facts of the case are that on 17.10.2006, a search and seizure operation under section 132(1) of theIncome Tax Act was carried out in Banarasi Group ofcases, both at the residential and the business premisesof the said group. Certain incriminating material was recovered and Panchnama was also drawn. On27.09.2007, a notice under section 153-C of the IncomeTax Act was issued after recording requisite satisfaction,calling upon the respondent – assessee to file its returns.The respondent – assessee is a partnership firm,which came into existence on 07.01.2005. The relevantassessment year is 2005-06. On 31.03.2008, therespondent – assessee filed its returns declaring incomeat Rs. 2,64,430/- for the assessment year 2007-08. Therespondent – assessee made an investment inconstruction of multiplex at 133/9, 'O' Block, KidwaiNagar, Kanpur and disclosed the investment of Rs.21,03,44,598/-. The investment therein was madeduring three financial years, i.e., 2006-07, 2007-08 and2008-09. The Assessing Authority, in order to ascertainthe correct investment made in the construction ofmultiplex, referred the matter to the DepartmentalValuation Officer. The Departmental Valuation Officer,by report dated 09.12.2008, determined the total investment of Rs. 27,50,55,529/- upto the date ofinspection. The Assessing Authority invited theobjection from the respondent – assessee on differentialvalue of investment shown in the construction. After considering the report of the Departmental Valuation Officer and objection of the respondent –assessee, the Assessing Authority, by its order dated31.12.2008, made addition of Rs. 2,50,98,612/- in thetotal taxable income of the respondent – assessee. Feeling aggrieved by the aforesaid order, the respondent – assessee preferred an appeal before theCommissioner of Income Tax (Appeals), Kanpur, whovide order dated 19.01.2010, dismissed the appeal andconfirmed the assessment order. Still feeling aggrieved by the aforesaid order, the respondent – assessee preferred an appeal before theTribunal, who by the impugned order dated 28.06.2010,has allowed the appeal of the respondent – assessee.Hence, the present appeal has been preferred by the Revenue against the impugned order of the Tribunal. It has been argued on behalf of the Revenue thatthe Tribunal has erred in allowing the appeal of therespondent – assessee on the facts as well as on law. Ithas been submitted that the Assessing Authority hasreferred the matter to the Departmental ValuationOfficer and after obtaining its report, it has rightlyadded the undisclosed investment made in theconstruction multiplex and the Commissioner ofIncome Tax (Appeals) has rightly confirmed theassessment order, but by means of the impugned order,the Tribunal has wrongly and in an arbitrary mannerdeleted the same. Revenue against the impugned order of the Tribunal. It has been argued on behalf of the Revenue thatthe Tribunal has erred in allowing the appeal of therespondent – assessee on the facts as well as on law. Ithas been submitted that the Assessing Authority hasreferred the matter to the Departmental ValuationOfficer and after obtaining its report, it has rightlyadded the undisclosed investment made in theconstruction multiplex and the Commissioner ofIncome Tax (Appeals) has rightly confirmed theassessment order, but by means of the impugned order,the Tribunal has wrongly and in an arbitrary mannerdeleted the same. Rebutting the arguments advanced on behalf of theRevenue, learned counsel for the respondent – assesseehas submitted that the Assessing Authority was notjustified in referring the matter to the DepartmentalValuation Officer, as neither assessment norreassessment proceedings were pending before him on the date of reference to Departmental Valuation Officer,i.e., on 27.09.2007. The returns, as prescribed under theIncome Tax Act, were filed much thereafter. In the alternative submission, learned counsel for the respondent – assessee has submitted that forreferring the matter to the Departmental ValuationOfficer, the account book of the assessee is required tobe rejected. He has placed reliance upon the judgmentof the Apex Court inSargam Cinema Vs.Commissioner of Income Tax (2010) 328 ITR (SC) andsubmitted that neither the assessment proceeding waspending, nor the account book of the assessee wasrejected on 27.09.2007, when the matter was referred tothe Departmental Valuation Officer. It has further beenargued that on the basis of search and seizure conductedon 17.10.2006 on the Banarsi Group Cases, noticesdated 27.09.2007 under section 153-C of the IncomeTax Act for the assessment years 2001-02 to 2006-07were issued. The validity of the proceedings under section 153-C of the Income Tax Act was challenged atthe appellate stage for the assessment year 2005-06 andthe same has been decided in favour of the respondent –assessee upto this Court in Income Tax Appeal No. 60of 2014 (CIT Vs. M/s Gopi Apartment), reported in2014 (365) ITR 411, wherein, this Court was pleased tohold that the proceedings initiated against therespondent – assessee under section 153-C of theIncome Tax Act were without jurisdiction. It is furtherargued that the very basis for referring the matter toDepartmental Valuation Officer in the case of theassessee does not survive and therefore, the presentproceedings are also without jurisdiction. We have perused the record of the case, from which it reveals that a survey was conducted on17.10.2006 at the Banarasi Misthan Group of cases andthereafter, proceedings under section 153-C of theIncome Tax Act were initiated on 27.09.2007, whichwas challenged by the respondent – assessee at the appellate stage and the Commissioner of Income Tax(Appeals), by the order dated 19.01.2010, has decidedthe appeal in its favour, against which, the Revenuefiled an appeal before the Tribunal, which was decidedin favour of the respondent – assessee. Against theorder of the Tribunal, the Revenue filed Income TaxAppeal No. 60 of 2014 before this Court and the samewas dismissed by this Court. The very basis for referring the matter toDepartmental Valuation Officer in the disputed years,where the proceeding has been initiated under section153-C of the Income Tax Act, has been held withoutjurisdiction. Once the very basis for referring thematter to the Departmental Valuation Officer hasvanished, the entire proceedings cannot be held to bejustified. Moreover, at the time of referring the matterto the Departmental Valuation Officer, neither returnswere filed, nor the books of account maintained by therespondent – assessee were rejected, nor any assessment or reassessment proceedings were pending. In view of the judgement of Sargam Cinema The very basis for referring the matter toDepartmental Valuation Officer in the disputed years,where the proceeding has been initiated under section153-C of the Income Tax Act, has been held withoutjurisdiction. Once the very basis for referring thematter to the Departmental Valuation Officer hasvanished, the entire proceedings cannot be held to bejustified. Moreover, at the time of referring the matterto the Departmental Valuation Officer, neither returnswere filed, nor the books of account maintained by therespondent – assessee were rejected, nor any assessment or reassessment proceedings were pending. In view of the judgement of Sargam Cinema (supra) and inter-parties judgement of this Court inIncome Tax Appeal No. 60 of 2014, the basis forreferring the matter to Departmental Valuation Officeritself vitiates and is liable to be quashed. In view of the facts and circumstances of the case discussed above, no substantial question of law arises inthe present appeal. The present appeal lacks merits and it is hereby dismissed. The questions of law are answered, accordingly, in favour of the respondent - assessee and against theRevenue. Order Date :-05.02.2019 Amit Mishra