Rajasthan H.C : Whether on the facts and in the circumstances of the case and in law the Tribunal was justified in cancelling the order under s. 263 of the IT Act, 1961, by holding that the decision of the jurisdictional High Court reported at 200 ITR 788 is not applicable even though the AO had found books of account defective and had made an addition of Rs. 25,000 and had erroneously disregarded the report of Departmental Valuation Officer to whom reference was made by he himself ?

High Court Of Rajasthan

CIT vs. Prakash Chitra

Sections 256(2)

N.N. Mathur & H.R. Panwar, JJ.

IT Ref. No. 44 of 1999

15th January, 2003

Counsel Appeared

Sandeep Bhandawat, for the Applicant : Suresh Ojha, for the Respondent

JUDGMENT

BY THE COURT :

This is an application under s. 256(2) of the IT Act, 1961, on the instance of the CIT, Bikaner, seeking direction to the Tribunal, Jaipur, to make reference of the following question for the opinion of this Court :

“Whether on the facts and in the circumstances of the case and in law the Tribunal was justified in cancelling the order under s. 263 of the IT Act, 1961, by holding that the decision of the jurisdictional High Court reported at 200 ITR 788 is not applicable even though the AO had found books of account defective and had made an addition of Rs. 25,000 and had erroneously disregarded the report of Departmental Valuation Officer to whom reference was made by he himself ?”

The instant application pertains to the asst. yr. 1993-94. The respondent-assessee during the assessment proceedings noticed that Departmental Valuer as well as registered valuer of the assessee determined the cost of construction in the cinema building at Rs. 7,91,000 and Rs. 5,52,800 respectively. The AO declared the cost of the construction during the year amounting to Rs. 4,07,452 with a lump sum addition of Rs. 25,000 only, thereby taking the cost of construction during the year at Rs. 4,32,452 without bringing any material on record for differing by such margin from the expert valuation resulting in under-assessment. In view of this, the CIT, Bikaner, found the order of the AO prejudicial to the interest of the Revenue and as such, a notice under s. 263 was issued to the assessee. After hearing the parties, the CIT(A), Bikaner, arrived at the conclusion that the AO had not properly appreciated the material placed before him by the assessee. He also found that the assessee by its conduct accepted that the books of account were not reliable and correct. In view of this, he allowed the appeal and direct the AO to hold proper inquiry. The CIT, also arrived at the conclusion that the AO was not making proper inquiries and without sufficient material on record to differ from the valuation report, as such, he cancelled the assessment order passed by the AO and remitted the matter for a fresh assessment by order dt. 23rd Feb., 1998.

The Tribunal found that the assessee maintained the books of account for repair and renovation of the building. It was found that while completing assessment the AO had not found any fault in the maintenance of the books of account. Thus, following the decision of this Court in CIT vs. Pratapsingh Amrosingh Rajendra Singh and Deepak Kumar (1993) 200 ITR 788 (Raj) held that order passed by the CIT was unjustified.

We have heard Mr. Sandeep Bhandawat, learned counsel for the Revenue and Mr. Suresh Ojha, learned counsel for the assessee. We have also read the order of the AO from the file of learned counsel for the assessee. Without expressing any opinion on the merit of the case, we are of the opinion that the Tribunal was not correct in refusing to refer the question as set out in the application.

In view of this, we allow the application and direct the Tribunal, Jaipur, to refer the question of law as set out in para No. 1, for the opinion of this Court in accordance with law.

[Citation : 265 ITR 271]

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