ORDER
1. These cross-appeals are directed against the separate orders of the CIT(A) for asst. yrs. 1997-98, 1998-99 and 1999-2000. In all these appeals, common issues are involved. Therefore, they are being disposed of by this common order for the sake of convenience.
2. The assessee is a co-operative housing society which constructed the houses for its members. The AO referred the matter to the DVO on 30th March, 1999 for determination of cost of construction of the complex constructed by the assessee. The report of the DVO was received on 5th July, 2000 by the AO. Thereafter, on 20th April, 2001, the AO issued notices under Section 148 for all the three years under appeal. In all the three years, the AO made the additions for difference between the cost of construction disclosed in the books of account and the cost of construction estimated by the DVO. The CIT(A) partly reduced the additions. Both the parties are in appeal; the Revenue against the relief allowed by the CIT(A) while the assessee against the additions sustained. Apart from above, the assessee in its appeals has also challenged the validity of reopening of assessment under Section 148 and also the issue of commission to the DVO under Section 131(1)(a).
3. At the time of Hearing before us, the learned counsel stated that the AO was not empowered to issue commission to the DVO under Section 131(1)(a) on 30th March, 1999 because no proceedings were pending on the above date. In support of this contention, he has relied upon the decision of the Tribunal in the case of Dr. Arjun D. Bharad v. ITO (2003) 78 TTJ (Nag) 832 : (2002) 83 ITD 774 (Nag). He further submitted that the AO was not justified in initiating reassessment proceedings on the basis of DVO’s report. In support of this contention, he relied upon the following decisions :
(i) ITO v. Vijay Kumar (2001) 73 TTJ (Jd) 17
(ii) Bhola Nath Majumdar v. ITO (1996) 221 ITR 608 (Gau)
(iii) Jamnadas Madhavji & Co. and Anr. v. J.B. Panchal, ITO (1986) 162 ITR 331 (Bom).
4. The learned Departmental Representative, on the other hand, referred to. Section 142A inserted by the Finance (No. 2) Act, 2004, with retrospective effect from 15th Nov., 1972. He contended that all the decisions relied upon by the assessee’s counsel are prior to the insertion of the above provision. After Section 142A, the decisions relied upon by the assessee’s counsel are no longer good law. He, therefore, submitted that the AO rightly reopened the assessments under Section 148 and has rightly relied upon the report of the DVO for making the additions under consideration.
5. We have carefully considered the arguments of both the parties and perused the material placed before us. We find that the Tribunal, Nagpur Bench, in the case of Dr. Arjun D. Bharad (supra) has held–
“The pendency of proceeding is sine qua non for giving jurisdiction to the concerned authority to make a reference to the DVO and the AO can exercise the powers conferred on him under Section 131(1)(d) only if an independent proceeding is pending with him.”
Admittedly, in this case when the AO made the reference to the DVO, no proceedings were pending before him and, therefore, he was not competent to refer the matter to the DVO.
In the case of Bhola Nath Majumdar (supra) the Hon’ble Gauhati High Court has held as under :
“A valuation report is only an opinion of a valuer. The same does not amount to information within the meaning of Section 147(a) nor can it form a ground for reason to believe that the assessee had failed to disclose his income fully and truly within the meaning of Section 147(a) of the Act. The condition precedent for assumption of jurisdiction under Section 147(a) of the Act is “reason to believe” of the ITO. An opinion of a third person cannot be “a reason to believe” of the ITO. It is the ITO who has to assert on materials available that he has reason to believe that any income chargeable to tax has escaped assessment or that the same was due to the fact that the assessee failed to disclose his income truly and fully. The reason to believe of an ITO cannot be substituted by an opinion of valuer.”
Similar view was expressed by the Tribunal, Jodhpur Bench, in the case of Vijay Kumar (supra). The Hon’ble Bombay High Court in the case of Jamnadas Madhavji & Co. (supra) has held as under :
“(i) that no proceeding was pending when the ITO issued the impugned summons and, therefore, the summons was liable to be quashed.
(ii) that the reason for issuing the summons as stated by the ITO in his letter of 30th Oct., 1980, was to investigate whether the assessment for the asst. yrs. 1972-73 to 1974-75 should be reopened under Section 147. It was for the ITO to first decide whether he had reason to believe that income had escaped assessment. Only if he decided that question in the affirmative could he initiate proceedings under Section 147 and only thereupon, could he become entitled to invoke Section 131(1). Therefore, the impugned summons was liable to be quashed.”
6. The learned Departmental Representative, has vehemently contended that the above decisions are no more good law in view of the insertion of Section 142A. Section 142A reads as under :
142A(1). For the purposes of making an assessment or reassessment under this Act, 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 is required to be made; the AO may require the Valuation Officer to make an estimate of such value and report the same to him.
(2) The Valuation Officer to whom a reference is made under Sub-section (1) shall, for the purposes of dealing with such reference, have all the powers that he has under Section 38A of the WT Act, 1957 (27 of 1957).
(3) On receipt of the report from the Valuation Officer, the AO may, after giving the assessee an opportunity of being heard, take into account such report in making such assessment or reassessment :
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 (1) of Section 2 of the WT Act, 1957 (27 of 1957).
7. From the above, it is evident that Section 142A empowers the AO to require the Valuation Officer for making the estimate of the value of any asset provided the AO required the same for the purpose of making the assessment or reassessment. The above provision does not empower the AO to refer the matter to the DVO for gathering information for reopening of assessment. Making the reassessment and reopening of assessment are two different things.
8. When the process of reopening of assessment ends and the assessment is validly reopened thereafter, the process of making reassessment starts. Therefore, even after the insertion of Section 142A, the AO should have reason to believe that any income chargeable to tax has escaped assessment as provided under Section 147 and thereafter only the notice for reassessment can be issued under Section 148. Even after the insertion of Section 142A, there is no amendment in the language of Section 147. Therefore, the condition prescribed under Section 147 for reopening of assessment still exists. The Hon’ble Gauhati High Court in the case of Bhola Nath Majumdar and the Tribunal, Jodhpur Bench, in the case of Vijay Kumar (supra) have taken the view that the valuation report is only an opinion of the valuer and an opinion of a third party cannot be a reason to believe of the ITO. The Hon’ble Bombay High Court in the case of Jamnadas Madhavji & Co. (supra) has held that the AO cannot issue summons under Section 131 for the purpose of making investigation for reopening of the assessment.
9. In view of the above, we are of the opinion that the issue of notices under Section 148 in all the three years under consideration was not in accordance with law. We therefore, quash the notices issued under Section 148 and consequently, the assessments completed in pursuance to notices under Section 148 are also quashed. Since the assessment itself has been quashed, the grounds raised by both the parties with regard to the merits of the additions for undisclosed investments in the house property need no adjudication at this stage because once the assessment is cancelled, the addition does not survive.
10. In the result, the assessee’s appeals are allowed while the Revenue’s appeals are dismissed.