ORDER
B.L. Khatri, A.M.
This is an appeal by the assessee against the order of the Commissioner (Appeals), Jodhpur, for the assessment year 1991-92. The appellant has agitated on various grounds which are discussed and decided through this consolidated order.
2. First of all, we shall take up the additional ground regarding charging of interest under section 234A and 234B of the Income Tax Act.
3. The learned authorised representative contended that the additional ground may be taken in view of the decision of the Hon'ble Supreme Court in the case of National Thermal Power Corporation Ltd. v. CIT : [1998]229ITR383(SC) . The additional ground has been raised against levy of interest under section 234A and 234B of the Act by the assessing officer. The learned authorised representative has contended that the charging of interest has been held as unsustainable in the cases of CIT v. Ranchi Club : [2001]247ITR209(SC) , Smt. Tej Kumari v. CIT (2000) 164 CTR (Pat) 201 and Udai Mistan Bhandar v. CIT : [1996]222ITR44(Patna) . The additional ground raised by the appellant is not being admitted. It was held in the case of Indian Steel & Wire Products Ltd. : [1994]208ITR740(Cal) that the additional ground should normally not be allowed. Even if allowed, limitation under section 253 should be adhered to i.e., within 60 days from the date of communication of the order of the Commissioner (Appeals). This Bench of Tribunal had already held in the following cases that the additional ground can be raised within the time-limit allowed under section 253(3) of the Act :
1. Asstt. CIT v. Ansari Builders, ITA No. 1864/Jp/94, order dated 21-12-2000.
2. Bana Lal Jat v. Asstt. CIT [ITA No. 511 & 517/Jp/2000, order dated 21-12-2000].
4. Ground No. 1 : Orders of the assessing officer and the Commissioner (Appeals) are bad in law.
The learned authorised representative has contended that the order of the assessing officer contained certain factual errors and there were also factual errors in the order of Commissioner (Appeals). Both the authorities below could not appreciate the facts of the case.
5. We shall take into account the correct facts as mentioned by the learned authorised representative while deciding the relevant grounds of appeal at the appropriate place.
6. Ground Nos. 2(a), 2(b), 2(c) & 2(d)
Authorities below ignored (i) provisions of law, (ii) judicial pronouncements; and (iii) documentary evidence and material on record.
7. The relevant provisions of law, judicial pronouncements, documentary evidence and material will be taken into account while deciding the relevant grounds of appeal at the appropriate place.
8. Ground No. 3(a) : Invalid issuance of notice under section 148.
Ground No. 3(b) : Pendency of earlier proceedings under section 139(4).
Ground No. 3(c) : Not pressed.
Ground No. 3(d) : No satisfaction of escapement of income to tax was recorded in the earlier reasonvague and unspecified reason as to the years involved and income escaped.
Ground No. 3(e) : Invalid service of notice and second notice without dropping of earlier proceedings.
9. Ground No. 3(a) and 3(b) :For ground No. 3(a), the learned authorised representative submitted that in July and August, 1992, the assessing officer who issued notice under section 148 was having time of 5-6 months available to him to issue notice under section 143(2) which was obligatory on him to ascertain the correctness of the return filed by the appellant under section 139 of the Act if he had any doubt or bona fide reason in his mind or was of the otherwise opinion.
9A. For ground No. 3(b), the learned authorised representative further submitted that for the purpose of making assessment to bring the correct income to tax net, in lawful manner, the powers to make assessment either under section 143(3) or under section 147 by reopening the proceeding are the same. By invoking section 147/148 the learned assessing officer does not get any extra powers to examine the case in a much detailed and comprehensive manner, but he only gets additional time by such special provision to tax the escaped income in the cases where the time-limit of making assessment as provided under section 153(1)(a) has already expired, therefore, to reopen the earlier completed assessment or if no assessment was made within the prescribed time-limit either on account of no return of income having been filed by the assessee or information of escaped income came to notice of the assessing officer subsequently and time to issue notice under section 143(2) has already expired, then he could only usurp and use the powers of section 147/148 and avail extra and additional time as is provided under these sections to make assessment after the expiry of normal time. But when the normal time-limit to proceed under section 143(3) to make a correct and lawful assessment is available, the law does not envisage nor it was intended by the law-makers nor also it has been provided under section 147 that the assessing officer should proceed under section 147/148 even in the cases where he has ample time to proceed for making assessment under section 143(3) in the normal and regular course. Thus, by not proceeding in the set and prescribed legal way and manner, the learned assessing officer committed a serious error of law and thus he has not acquired a valid and lawful jurisdiction under section 147/148 of the Act. The learned authorised representative relied on the following judgments :
1. Ranchhoddas v. CIT : [1959]36ITR569(SC) ;
2. Ghanshyamdas v. Regional Asstt. Commr. of S. T. : [1964]51ITR557(SC) ;
3. CIT v. K. V. Manak Ram & Co. : [2000]245ITR353(Ker) ;
4. Trustees of H.E.H., The Nizam's, Supplemental Family Trust v. CIT (2000) 242 ITR 381 ;
5. Kamal Textiles & Ors. v. ITO : [1991]189ITR339(MP) ; and
6. CIT v. Rajendra G. Shah : [2001]247ITR772(Bom) .
10. We have considered the rival submissions regarding ground Nos. 3(a) and 3(b). The learned authorised representative contended that when the time to issue notice under section 143(2) is available the assessing officer should not have proceeded under section 147 of the Act for issue of notice under section 148 of the Income Tax Act. The learned authorised representative had relied on the case of Ranchhoddas v. CIT (supra) wherein it was held that where in respect of any year a return had been voluntarily submitted before assessment, the assessing officer cannot choose to ignore the return and any notice of reassessment and consequent assessment under section 34 ignoring the return is invalid.
11. In the case before us, the return had not been ignored. The assessing officer had completed the summary assessment i.e., he processed the return under section 143(1)(a) of the Act. Therefore, this judgment is of no help to the assessee.
12. In the case of Ghanshyamdas v. Regional Asstt. Commr. of S.T. Nagpur (supra) it was held that if assessment proceedings have been initiated, income cannot be said to have escaped assessment until a final order of assessment is passed on the pending proceedings.
13. In the case before us, the proceedings had been terminated and no proceedings were pending. Therefore, this case is also not relevant here.
14. In the case of K. V. Manak Ram & Co. (supra) it was held that proceedings under section 143(1)(a) does not result in an order of assessment. The intimation given under section 143(1)(a) cannot be treated an order of assessment. It is only to be deemed an order for the limited purpose of sections 154, 246 and 264 of the Act.
15. This judgment is also of no help to the appellant. The proviso under section 143(1)(a) provides that except as otherwise provided in this sub-section acknowledgement of the return shall be deemed to be an intimation under this sub-section where either no sum is payable by the assessee or no refund due to him. An intimation is deemed to be an order for the purpose of initiating proceedings under section 147 of the Act. The scope and effect of the newly substituted provision with effect from 1-4-1989, section 147 by Direct Tax Laws (Amendment) Act, 1989, and subsequently amended by Direct Tax Laws (Amendment) Act, 1989, with effect from 1-4-1989, as also under sections 148 and 152 have been elaborated in the departmental Circular No. 549, dated 31-10-1989, which inter alia provides for reopening of scrutiny and non-scrutiny assessments. Therefore, the summary assessments can also be reopened under the amended law.
16. In the case of Trustees of H.E.H., The Nizam's Supplemental Family Trust v. CIT (supra), it was held that reassessment proceedings cannot be initiated so long as assessment proceedings are not terminated.
17. We find that in the case before us the assessment proceedings have already been terminated by processing the return filed under section 143(1)(a) of the Act filed by the assessee.
18. In the case of Kamal Textile & Ors. v. ITO (supra) it was held that it was difficult to accept the contention that on issuance of such intimation the assessment proceedings can be reopened only in terms of section 147 and the authority is not entitled to proceed under sub-section (2) of section 143.
19. Therefore, this judgment is also of no help to the assessee. This judgment does not lay down that no notice under section 148 can be issued when the time is available for issue of notice under section 143(2) of the Act.
20. In the case of Rajendra G. Shah (supra), it was also held that all the proceedings were taken pursuance to the reopening of the assessment in 1985 losing sight of the fact that the main return was pending for assessment.
21. The facts of this case are also different from the facts of the case of the assessee.
22. An important principle of law was explained in Vipan Khanna v. CIT on the powers available to the assessing officer under section 147 of the Act. A notice for scrutiny of accounts under section 143(2) has to be issued within 12 months from the end of the month in which return is filed. If it is not so issued, the assessing officer can, no doubt, exercise his power under section 147, but it cannot be done merely for scrutinising the return or verification of the same. Where the assessing officer has issued notice under section 147 accompanied by a letter indicating that he wanted to verify the claim of carriage expenses and the income in respect of each truck, besides check the overdraft account apart from such details, there was absolutely no inference of any escapement of income so as to justify notice under section 147. The notice has to be issued only under section 143(2) in such cases. Section 147 is not an extension of the right under section 143(2) of the Act.
23. Therefore, we conclude that notice under section 143(2) is issued to verify the correctness of the return filed whereas notice under section 148 is issued for escapement of income. It is once again repeated that section 147 is not an extension of power under section 143(2). Under the law, there is no provision to debar the assessing officer to issue notice under section 148 of the Act even when the normal time-limit to proceed under section 143(2) is available to him. Therefore, this contention of the learned authorised representative fails.
24. Ground No. 3(c) : Not pressed. Hence, dismissed.
25. Ground No. 3(d) : Non-specific and vague reasons. The learned authorised representative submitted that the reasons recorded for issue of notice under section 148 are non-specific and vague.
26. Section 148 provides that the assessing officer shall, before issuing any notice under section 148, record his reasons for doing so. It is a trite and settled position of law that the reasons recorded should be specific and not vague. If the reasons are vague and not specific either with respect to the year of assessment involved or quantum of income involved or status of the assessee is involved, then in such situation the condition of recording of valid and lawful reasons is not fulfilled and, therefore, no valid and lawful jurisdiction can be said to have usurped by the assessing officer. Here in this case of the appellant, the reason recorded by the assessing officer on 13-10-1992, reads as under :
'Assessment year 1991-92
13-10-1992
Shri Uttam Chand Nahar is assessed to tax in Ward-3, Jodhpur. The ADI (Jodhpur) had received a TEP, which has been forwarded by Dy. Commissioner, Jodhpur, vide his letter dated 20-7-1992.
As per information of ADIT, Jodhpur, the assessee has constructed a house at Ajit Colony, Jodhpur. Since, assessee has not disclosed any investment, he has concealed the facts and has furnished inaccurate particulars. Issue Notice under section 148.
Sd/-
(G. C. Singhvi) '
27. From the perusal of the above, it is patently clear that it is because of non-disclosure of any investment, the assessing officer held that the assessee has concealed the facts and furnished inaccurate particulars. Further, this reason does not mention the years of construction which of course were known to the assessing officer and to the ADI by virtue of his return of income from assessment year 1990-91 and when he refers to the TEP received from ADI. The appellant in all clear terms informed the ADI and in the computation of income of assessment year 1990-91 that construction of the house at 52, Ajeet Colony was started by him in the year 1989 corresponding to the assessment year 1990-91, therefore, the not mentioning of the relevant assessment years involved (because the payment investment as per facts on records are in relation to the two assessment years), it is submitted that the reasons are vague which did not provide valid and lawful jurisdiction. That apart, since there was no column or any requirement in the prescribed return of income to indicate the investment made in the construction of the house, therefore, on that basis to hold that assessee has not disclosed any investment-it can certainly not be a reason for reopening the assessment. The return filed was neither found defective for invalid in any manner. Had it been so, notice under section 139(9) ought to have been issued. The reason recorded, therefore, is vague, non-existent and was only a make-belief reason.
28. We may submit that though the sufficiency of the ground cannot be looked into yet it is open for the appellate authority or court when it is established by the assessee that there in fact, existed no belief or that the belief was not bona fide one or was based on vague, irrelevant and non-specific information, then in that case for such limited extent, the court may look into the conclusion arrived at by the assessing officer and examine where there was any material available on record from which the requisite belief could be formed by the Income Tax Officer and further whether the material had any rational connection with or live-link for the formation of the requisite belief. It was held so by the Hon'ble Bench in Choudhary Motors v. Assistant Commissioner [ITA No. 2676/Jp/94 (Assessment year 1990-91)]. By following the decision of Hon'ble Supreme Court reported in Phool Chand Bajrang Lal & Anr. v. ITO : [1993]203ITR456(SC) at page Nos. 458 and 477 (E) & (G), wherein it was held by the Hon'ble Supreme Court that it is open to assessee to establish that there in fact did not exist reason or it was not bona fide. Since the earlier proceeding on the return under section 139 was pending and in that fact situation no logic permits to hold that some income has escaped assessment or the appellant did not disclose any investment particularly so when there is no requirement in the return and because no assessment whatsoever have been made so far. Such reasons are, therefore, make-belief reason. Construction of the house has already been brought on record vide computation of income of assessment year 1990-91.
Ground No. 3(e) : Service of the notice under section 148 was not on assessee.
29. In ground No. 3(e), the learned Authorised Representative submitted that the service of notice was not on the assessee. It is a condition precedent, to acquire a valid and lawful jurisdiction that such notice should be served upon the assessee. This notice was served on the assessee's son Shri Ashok, who was not authorised to receive such notice and, therefore, the issuance of notice under section 148 did not provide valid and lawful jurisdiction to the learned assessing officer. It was held that where even the notice under section 139(2) was received by the assessee's son who had in the past received such notice, yet it was held that since he was not authorised to receive such notice no valid jurisdiction acquired. He relied on the following judgments :
1. ITO v. Suraj Prakash ;
2. Thangam Textiles v. ITO (1973) 90 ITR 112 ; and
3. CIT v. Girdhari Lal 0065/1983 .
30. Thus, the service of notice on the assessee is a must. Such notice either should be served on the assessee himself or on any other person specifically authorised for such purpose. Here as said above, the notice was not served on the assessee, but was on Shri Ashok, the son, who was not duly authorised to receive such notice, therefore, no valid jurisdiction can be said to have been acquired by the assessing officer. Thus the appellant's case is fully covered by the decisions cited above.
31. The learned Authorised Representative further submitted that subsequent notice under section 148, dated 20-1-1995, was unlawful and no valid jurisdiction acquired. He quoted the following portion from page 3 of the assessment order :
'In this regard, I would like to draw the attention of the learned counsel to the assessment proceedings recorded in order sheet where no such proceedings initiated vide notice under section 148 dated 13-10-1992, were dropped by the assessing officer.
After considering the objection filed by the Authorised Representative of the assessee that the earlier notice was not properly served, a revised notice was issued on 20-1-1995 and served on assessee properly on 25-1-1995. In these circumstances the version of the Authorised Representative that the earlier initiated proceedings were dropped, has got no weight at all. Since the earlier notice could not be served properly the proceedings cannot be said to be initiated earlier. In view of these facts the contention of the Authorised Representative is rejected.'
32. The above observation of the learned assessing officer, therefore, makes it clear as an admission that the earlier notice was not properly served on the assessee and, therefore, he had issued a revised notice on those very reasons which were recorded by the then assessing officer without dropping the earlier proceedings initiated on 13-10-1992. With due respect it is submitted that when the service of notice under section 148, dated 13-10-1992, was not valid as per the assessing officer himself, the proceeding initiated vide notice; dated 13-10-1992, was patently bad in law and the continuation thereof on those very reason by the revised notice could not be said to have been provided a proper, valid and lawful jurisdiction to the learned assessing officer to continue those very proceedings which were otherwise also unlawful and invalid. He has continued those very unlawful proceedings which did not provide any valid and lawful jurisdiction to him.
33. The second notice issued by the assessing officer on 20-1-1995, and served on 25-1-1995, was the revised notice as per the learned assessing officer and was issued on those very reasons as a step in continuity without closing or dropping the earlier initiated proceedings. Since the earlier proceedings were not valid and having not been closed as admitted by the learned assessing officer, the subsequent notice issued by the learned assessing officer is, therefore, not valid which also did not and could not provide any lawful and valid jurisdiction. As the learned assessing officer issuing notice dated 20-1-1995, has not recorded the reasons afresh by closing the earlier proceeding under section 148/147 dated 13-10-1992, therefore, both the notices under section 148 have not provided proper and lawful jurisdiction to the learned assessing officer to frame the impugned assessment order, therefore, the said assessment deserves to be annulled.
34. The learned Departmental Representative relied upon the orders of the authorities below.
35. For ground No. 3(d), we have considered the rival submissions. The assessing officer did not mention the amount of income escaped for initiation of proceedings under section 147 of the Act. Section 149 of the Act makes it clear and obligatory on the part of the assessing officer to mention specific income escaped and the time-limits for issue of notice under section 148 of the Act. It was held in the case of Phool Chand Bajrang Lal v. ITO (supra) that reassessment proceedings cannot be initiated on the basis of vague and non-specific information. Therefore, we hold that initiation of reassessment proceedings is invalid and the order passed in pursuance of such proceedings is hereby quashed.
36. We have also considered the rival submissions on ground No. 3(e). The learned Authorised Representative contended that the service of notice dated 13-10-1992, was not on the appellant, but on his son, Shri Ashok who was not authorised to receive the notice. We find that it is provided in CPC that when defendant is not found at the residence within the relevant time and he has no agent empowered to accept service of summons on his behalf, service may be made on adult member of the family, whether male or female who is residing with him. However, we find that second notice issued under section 148 had properly been served on the appellant. Therefore, this contention of the learned Authorised Representative fails.
37. The second contention of the learned Authorised Representative is that second notice under section 148 was issued by the assessing officer on 20-1-1995, and served on the assessee on 25-1-1995, was issued on the same reason without dropping the earlier proceedings initiated under section 147 of the Act. The learned Authorised Representative rightly placed reliance on the judgment of CIT v. Jaideo Jam & Co. and Smt. Nilofer Hameed & Co. v. ITO : [1999]235ITR161(Ker) . We find that the assessing officer had initiated second proceedings under section 147 of the Act without dropping the original proceedings and without recording the reasons as per provisions of law. This second notice dated 20-1-1995, issued by the assessing officer was not valid notice. Therefore, this assessment framed in pursuance of a invalid notice is annulled.
38. Ground No. 4.1 : Books of accounts maintained.The assessing officer observed that the assessee has not maintained the books of accounts for the purpose of construction and did not produce day-to-day account of cost of construction with vouchers. Therefore, admitted cost of Rs. 14,32,438 by the assessee in his statement recorded on oath was taken as correct.
38.1. The learned Authorised Representative submitted that the assessee did not maintain books of accounts and, therefore, the assessing officer is not correct in saying so. In letter dated 9-3-1995, the appellant has informed the assessing officer that he has maintained the books of accounts for the purpose of cost of construction of the residential house. Such books were earlier produced before predecessor-in-office who has issued notice under section 148, dated 13-1-1992, to the appellant in the case of appellant's son, Sh. Ashok Kumar Nahar and these were examined. Therefore, there was no justification for referring the matter to departmental valuation cell for determining the cost of construction. No reference could be made under section 131(1)(d) of the Act without rejecting the books of accounts. The decision of Rajasthan High Court reported in CIT v. Pratap Singh Amro Singh, Rajendra Singh and Deepak Singh and ITAT Jaipur in ITO v. Tek Chand were also quoted.
39. As stated above, the learned assessing officer wrongly repeated that the appellant has admitted the cost of construction at Rs. 14,32,438 in the statement on oath. The appellant has never admitted the cost of construction at Rs. 14,32,438.
40. That apart, it is not necessary that the books of accounts should be maintained on day-to-day basis for construction of the house as held by the Jaipur Bench of the Tribunal in Swarn Pal Singh Kanda v. ITO (1998) 21 Tax World 393 (Jp).
41. Ground No. 4.2 : House belonged to four co-owners
The learned Commissioner states that as regards the objection of the appellant that the building belongs to four co-owners the argument of the appellant was not supported by any documentary evidence.
42. The learned Authorised Representative made the following submissions. The documentary evidence in the form of statement of the assessee recorded under section 131 on oath, as per the assessing officer is available on record and evidence in the form of registered lease deeds of the respective co-owners of the respective portions of residential house is available on record (Paper book page Nos. 77 to 102) the evidence in respect of assessment orders under the land and building tax of all the co-owners is also available on record (paper book pages 103 to 110). Copy of LBT order of Ashok Kumar Nahar is available in his case record. The evidence that the other co-owners, Shri Ashok Kumar Nahar has been assessed for unexplained investment in construction by the same assessing officer who has issued notice under section 148 to the appellant is also available on record. All these abundance of documentary evidence were available on record, one fails to understand how such a wrong finding can be given in the order, or, else what other documentary evidence one could have placed on record in such fact situation, the learned Commissioner (Appeals) has also not indicated any such other expected evidence by him.
43. Ground No. 4.3 : No column in return of income to disclose incurring of costNo effect under section 139(9) raised.
The learned Commissioner (Appeals) stated in his order that the appellant had not given correct particulars in the income-tax returns. His books of accounts or vouchers have to be rejected.
44. The learned authorised representative made the following submissions :
This is absolutely an imaginary finding, how far is sustainable is to be judged by the Hon'ble Tribunal. There is no case of not giving correct particulars in the income-tax returns. The return of income when does not have any column calling from appellant/assessee to disclose investment/expenditure in construction of house then the appellant/assessee is legally not under any obligation to give such information. Moreover, his return of income was not found defective under section 139(9) as no such notice required for under section 139(9) was issued. Moreover, the appellant has disclosed the fact of starting construction of new house in assessment year of starting thereof i.e., in assessment year 1990-91. The learned Authorised Representative relied on the following judgments :
(i) V.D.M. RM.M. RM. Muttaiah Chettiar v. CIT : [1969]74ITR183(SC) ;
(ii) CIT v. Laxmi Devi Mehta (1993) 70 Taxman 399 (Cal); and
(iii) Raj Kumar Rawla v. Asstt. CIT (1992) 42 ITD 509 (Cal).
45. Ground No. 4.4 : This issue has a reference to the point already decided.
46. Ground No. 4.5 : Unfounded and arbitrary basis of making addition.
The learned Authorised Representative made the following submissions :
The overall investment by all the co-owners in the said residential house was made as was detailed in fact No. 46 of statement of facts available at paper book, page No. 54.
Rs.
1.
Shri Uttam Chand Nahar
2,25,646
2.
Smt. Kamla Devi Nahar
3,70,679
3.
Shri Ashok Kumar Nahar
1,63,000
4.
Shri Anil Kumar Nahar
1,73,190
9,32,515
47. The learned assessing officer made addition of Rs. 5 lakhs in this amount of the disclosed investment of Rs. 9,32,515 as per the alleged surrender of the appellant taking the investment in the residential house at Rs. 14,32,515 as against Rs. 14,26,500 determined by DVO. While arriving at the addition, the learned assessing officer has given credit of Rs. 4,25,000 only instead of Rs. 4,95,000 as per evidence and claim of the appellant from the sale of his old house at 129, Ajeet Colony. Thus Rs. 10,07,525 (Rs. 14,32,515 - 4,25,000) was added in the income of the appellant which is in dispute in the appeal. He even ignored the disclosed investment by the other co-owners.
48. It has been shown and established by evidence on record that the investment in the entire building was made by different persons. An addition in respect of cost of construction relating to Shri Ashok Kumar Nahar's portion was also made in his case and that matter has attained finality because of availing KVSS by him when the appeals filed by him were pending. In this fact situation, it is alternatively submitted that it was wholly unjudicious, arbitrary and unlawful action on the part of the assessing officer to treat the entire investment made in the construction of the house and the impugned addition in the hands of the appellant by ignoring the investment made by other co-owners. As a matter of fact there could not be any addition.
49. Further, as is evident from the facts on record that construction was spread over in two years, i.e., in assessment years 1990-91 and 1991-92 and, therefore, alternatively submitted that the addition made by the learned assessing officer and which is disputed in this appeal in any event ought to have been spread over in two assessment years and legally this addition could not have been made in one year as has been done. The learned Authorised Representative relied on the decision of Allahabad High Court in Ram Swaroop Cold Storage & Allied Industries v. Asstt. CIT : [1991]192ITR537(All) , and submitted that if there was any justification in making any sort of addition, and that too, for the relatable proportion of the unexplained investment, if any, is established by the assessing officer in relation to the appellant, that could have only been made and not the investment of the other co-owners and that too in one year. Thus, on the merits of the case, it is established that there is no justification and no material on record to make the addition as was made.
Ground No. 4.6 : Alleged surrender.
49.1 The learned Authorised Representative of the assessee submitted that the only basis for making this impugned addition was the so-called surrender of the appellant and the determination of cost of construction by the departmental valuer.
50. In the statement which is available at page Nos. 111 to 126, the assessee has not surrendered any amount as alleged by the assessing officer. At page Nos. 125 & 126, question No. 46 and its answer established this fact. The learned Authorised Representative reproduced the question and answer of Q. No. 46 as under :
'Q. I am giving one opportunity to you, so that you voluntarily offer to tax your undisclosed income and investment. State.
A. I want to avail the benefit of your facility and the expenditure incurred in the construction of both the buildings which I cannot fully prove, want to declare. Such investment was made in 5 years, instead of one year. I will submit my written consent in this regard till 24-8-1992. This amount is about Rs. 5,00,000 and was earned money of the three male persons in 5 years, thus, it has been earned during the preceding 5 years by the three persons. I am doing this for the peace of my family and with a view to get rid of legal complications and for this, department would not penalise me, accept tax, with this hope I am stating this last statement.'
51. From the above reply it is established that no surrender as has been alleged, was made by the appellant. It was simply an indication of desire subject to confirming the same later on by written consent. The appellant had never confirmed in writing. The appellant has sent a registered letter (paper book page No. 120), wherein he has raised certain questions and submitted that no copy of statement has so far been provided to him and he has also clearly stated that he had not surrendered any amount.
52. From the statement so recorded it is also established that this so-called surrender was for his both buildings, one which was sold in 1989 relating to assessment year 1990-91, and the other for which the disputed addition was made in the assessment year 1991-92. This was for 5 years and for three male persons of his family. Therefore, in any event if such surrender is accepted then also, alternatively submitted that such surrender amount was to be proportionately divided in two buildings and in five years and in three male persons. It was not done, therefore, the addition on the basis of such alleged surrender is unsustainable.
53. So far as the surrender is concerned, the fact situation has already been explained and quoted above. The legal position as regards to relying on the statement or admission or for that matter on any document, the position of law is very clear and it has been held time and again that the statement/admission or any other document should be read as a whole to draw a proper conclusion. It is not permissible to twist the facts stated in such documents or to only rely on some favourable words or sentence or on part of the document only and ignore the other words or sentence or other averments made and available but not found beneficial. We place reliance on the following authorities for the above proposition of law.
1. Indore Malva United Mills v. State of M.P. : [1966]60ITR41(SC) ;
2. ITO v. Ghanshyam Bhai & Thakkar ; and
3. Chandra Mohan Mehta v. Asstt. CIT (1999) 71 ITD 245 (Pn).
Ground No. 4.7 : Reference to DVOUnauthorised as books maintained.
54. Regarding relying on the valuer's report, it was submitted that firstly to send the reference for determination of cost of construction in the presence of books of accounts maintained for cost of construction was not at all justified and was against the authority of law. Such reference can only be sent where the books of accounts are held as not reliance worthy and are rejected. There was no occasion before the learned assessing officer prior to sending reference to the valuer to examine the books of accounts. Without examining the same and rejecting them no straightaway reference could have been made. Therefore, in view of the following decisions, the valuer's report and determination of the cost of construction by him has to be discarded outrightly. The reliance on such report was unlawful and unauthorised.
1. CIT v. Pratap Singh Amro Singh, Rajendra Singh & Deepak Kumar (supra);
2. ITO v. Tekchand (supra);
3. CIT v. Hotel Joshi ;
4. Swarnpal Singh Kanda v. ITO (supra).
55. In view of this, valuer's report determining the cost of construction has outrightly to be rejected. If this is done and the statement of the appellant is read as a whole it is established that the addition made by the learned assessing officer on the basis of these two factors is wholly unsustainable. There is no other material on record nor such has been referred to or relied upon in the impugned order. The same was made in an arbitrary manner and by drawing perverse inference and conclusions from the facts on record. The other co-owners have made their own investments and there was no Benami nor it was established.
56. Ground No. 4.8 : CPWD rates applied by the DVO.
For this ground the learned Authorised Representative of the assessee made the following submissions-Valuer's report was also erroneous inasmuch as the valuer has applied CPWD rates whereas it has been the trite position of law that the state PWD rates will only be applicable. Assessee's registered valuer has raised various objections and found defects/errors in the valuation made by the departmental valuer. All these were ignored in light-hearted manner and were not at all considered. The assessee's objection through its valuer are available at paper book page Nos. 136 to 140 whereas at page 140 the registered valuer arrived at the valuation at Rs. 9,90,000 by applying the CPWD rates as was applied by the departmental valuer. The difference worked out by him was on account of various errors in the departmental valuer's report. The registered valuer further declared that if the State PWD rates are being applied then the cost of construction would come to a figure which would be much lower than Rs. 9,90,000 and, therefore, it was advised by the registered valuer that the declared cost of construction by the assessee at Rs. 9,92,000 should have been accepted.
57. In view of the above fact situation it is established that even this determination of cost of construction was not in consonance with the judicial accepted norms and the learned assessing officer did not establish the alleged unexplained investment in the construction of the property and, therefore, on the merits of the case the addition made was wholly arbitrary and was on unfounded materialSection 69 was not attracted. Nor the learned assessing officer established the unexplained investment. This was unjudicious and made ignoring all the norms, therefore, the same deserves to be deleted. The learned Authorised Representative relied on the following decisions :
1. CIT v. Hotel Joshi (supra)
2. ITO v. Tekchand (supra)
58. Ground No. 4 : The learned Departmental Representative relied upon the orders of the authorities below.
59. Now we shall discuss and decide all the issues raised through ground No. 4. Though we have already quashed the order of the assessing officer yet all the issues are also being decided on merits also.
60. In ground No. 4.1, the learned Authorised Representative of the assessee contended that the appellant had maintained books of account for the purpose of cost of construction of the residential house. It was also contended that no reference can be made to the valuation cell when regular books of accounts for the cost of construction are being maintained. If any account of the expenses are regularly maintained and supported by vouchers, there should be no reason not to accept the same for the cost of construction and there was no need to make a reference to the Valuation Officer. He has also relied upon the judgments of CIT v. Hotel Joshi (supra) and CIT v. Pratap Singh, Amro Singh, Rajendra Prasad and Deepak Kumar (supra). We find that the assessing officer has clearly mentioned at page 5 of the order that the assessee has not maintained books of accounts for the purpose of construction with vouchers. It was held in the case of Pratap Singh Amro Singh (supra) that when the expenses were fully supported by vouchers, full details were also mentioned in respect of each item in the books and proper books of accounts are maintained which had been accepted in the past and no defects were pointed out in the books then no addition can be made on the basis of the valuation report.
61. In this case we find that books of account containing item-wise details of expenditure had not been produced before the assessing officer and the Commissioner (Appeals). Therefore, the assessing officer had made valid reference to the Valuation Officer. This contention of the learned Authorised Representative is not accepted.
62. Ground No. 4.2 is regarding ownership of the residential house. This issue will be discussed later on at the appropriate place.
63. Ground No. 4.3 is regarding non-disclosure of cost of construction in the return of income as there was no column in the return. We are of the opinion that no specific discussion on this point is required as we have already held that notice issued under section 148 was invalid.
64. Ground No. 4.4 : We have already decided this issue.
65. Ground No. 4.5 : The contention of the learned Authorised Representative that cost of construction may be spread over two years is not being accepted as no specific evidence regarding purchase of material or investment by the co-owners in two years separately had been furnished.
66. Ground No. 4.6 : is regarding alleged surrender. We find that as per statement of facts investment of Rs. 9,32,515 was declared in the names of 4 co-owners including the appellant. The assessing officer had added the amount of surrender of Rs. 5,00,000 and took the total investment at Rs. 14,32,515 and did not rely on the valuation report of the government valuer who estimated the cost of construction at Rs. 14,26,500.
67. From the facts as explained by the learned Authorised Representative, it is evident that surrender was for both the buildings for 5 years and for three male persons. Addition on the basis of such surrender in one year in the hands of the appellant is not sustained.
68. Ground No. 4.7 is regarding reference to DVO. We have already discussed and decided this issue in this order.
69. Ground No. 4.8 is regarding application of PWD rates in place of CPWD rates for estimating the cost of construction. The learned Authorised Representative had rightly placed reliance on the cases of Hotel Joshi (supra) and Tek Chand (supra). This Bench of the Tribunal had taken consistent view that PWD rates should be adopted in place of CPWD rates. Therefore, the assessing officer is directed to adopt PWD rates after obtaining valuation report as per PWD rates from the appellant in respect of share of the appellant in that building.
70. Ground No. 5 : Co-owners Benami
Through this ground, the learned Authorised Representative submitted that the learned Commissioner (Appeals) has erred in not deciding ground No. 3 taken before him which read as under :
'That, on the facts and in the circumstances keeping in view the material available on record and applying thereto the relevant provisions of law supported by various judicial pronouncements the learned assessing officer has absolutely erred in law and was erroneous on facts as well as in giving the finding in the impugned assessment order that Smt. Kamla Devi Nahar, Shri Ashok Kumar Nahar and Shri Anil Kumar Nahar so far as the building constructed on plot No. 52, Ajeet Colony, Jodhpur, is concerned. This finding is without any basis and material on record and is the result of an arbitrary approach and presumption of the learned assessing officer, therefore, the same is incorrect and liable to be quashed and expunged from the impugned assessment order.'
71. The finding of the learned assessing officer as to Benamidari was disputed and objected through the above ground before him. As per the facts and material available on record and submissions made above, it is submitted that the onus to establish Benamidari is on the learned assessing officer which he has not discharged. Merely by stating or holding one person as Benami of others is not enough and that does not discharge the onus of the person who claims otherwise than is apparent. The Hon'ble Rajasthan High Court has in CIT v. Dr. Sohanlal (1998) 144 Taxation 582 (Raj) has in the facts and circumstances of the case where the house property held in the names of minor sons which was purchased by minors by taking loan from assessee, his wife and from third party and sale deed was registered in the names of minors, it was held that the assessee was neither the real owner of the property nor the transactions had to be considered as Benami. The other authorities alternatively taken aid of are as under :
(i) Shantilal (HUF) v. Dy. CIT (1986) 19 Tax World 237 (Jp) 239 and at 241 to 243 para No. 16 onward;
(ii) Laxmandas v. ITO (1998) 21 Tax World 264 (Jp); and
(iii) Lal Chand Agarwal v. Jt. CIT (1998) 21 Tax World 213 (Jp).
'To hold a person Benami of another, one ought to have concrete evidences in contrast to sheer presumption and suspicion and in such cases initial burden lies on the revenue.'
72. In view of the above as a matter of fact there is no Benamidari in the appellant's case and he being not the owner of the entire property, the finding given by the learned assessing officer on the basis of presumption, without establishing the Benamidari is, therefore, patently wrong and, therefore, has to be quashed which the learned Commissioner (Appeals) did not consider. Therefore, it has been prayed that the Hon'ble Tribunal may decide and expunge this finding.
73. In ground No. 5 it was contended that the finding of the Benamidari was wrong. We are of the opinion that the onus of proof in the case of Benamidari transactions lies on the assessing officer who alleged that the three persons, Smt. Kamla Devi Nahar, Shri Ashok Kumar Nahar and Shri Anil Kumar Nahar are Benamidars of the appellant. Ordinary presumption of law is that the apparent owner is the real owner unless the contrary is proved. The assessing officer could not prove that the total investment in construction of house was met by the appellant. Addition of cost of construction was also made in the hands of Shri Ashok Kumar Nahar as per his share in the house. This case has attained finality due to availing of KVSS by him. The appellant has filed evidence : (i) in the form of registered lease deed of the respective co-owners of the respective portion of residential house, and (ii) evidence regarding land and building tax of all the co-owners. In the statement source of investment by four co-owners was explained. The appellant had invested only Rs. 2,25,646 and he had sufficient fund after sale of old house for Rs. 4,25,000. All the four co-owners had arranged their own funds. Therefore, keeping in view the facts of the case and the judgment of the Hon'ble Rajasthan High Court in the case of CIT v. Sohan Lal (supra) we hold that residential house is owned by the four co-owners and Smt. Kamla Devi Nahar, Shri Ashok Kumar Nahar and Shri Anil Kumar Nahar are not the Benamidars of the appellant. The assessing officer could have taken necessary action in the hands of other co-owners are done by him in the case of Shri Ashok Kumar Nahar. Though we have already held that assessment is null and void, yet on merits we hold that cost of construction should be taken as per PWD rates in the ratio of investment by each co-owner and after that investment by the appellant is to be determined.
74. Ground No. 6 : The Commissioner (Appeals) erred in observing to examine the case from prosecution angle.
The appellant should have raised this point at the relevant time. In this case no prosecution has so far been launched. Therefore, we decline to express our opinion on this issue.
75. In the result, the assessment is annulled and the appeal is allowed.