INCOME TAX ACT, 1961

Income from undisclosed sources- Addition under section 69C-Expenditure incurred on construction project-Reference to DVO

Assessee was a construction company. It completed one of its projects and declared profit of said project. AO referred matter to Departmental Valuation Officer (DVO) to determine cost of construction of that project. He made addition to income of assessee on the basis of the report of DVO. CIT (A) confirmed action of AO. Tribunal deleted the impugned addition on the ground that section 142A does not deal with unexplained expenditure under section 69C, therefore, it was not permissible for AO to refer matter to the DVO for obtaining cost of construction. Held: Section 142A(1) enabled AO Officer to get valuation done from Valuation Officer in certain specific cases. These would be cases wherein an estimate of value of any investment referred to in section 69 or section 69B or the value of any bullion, jewellery or other valuable articles referred to in section 69A is required. Section 69A deals with unexplained money. Section 69B relates to amount of investment, etc., not fully disclosed in the books of account and the provision relating to unexplained expenditure is in section 69C. [Para 9]

AO had doubted the expenditure incurred by assessee on the project. Therefore, he referred the matter to the DVO for the purpose of determining the cost of construction of the project. However, for the purpose of getting himself satisfied about the purported unexplained expenditure under section 69C, powers under section 142A could not be invoked. [Para 10]

So far as contention of revenue was concerned the expenditure incurred should be considered as coming within the expression investment, if investments could include within its fold expenditure as well which were incurred by a businessman during the course of his business, there was no necessity of having a separate provision under section 69C which deals with unexplained expenditure. [Para 13]

The scope and ambit of sections 69B and 69C were altogether different. The connotation of the investment appearing in section 69B had to be in context of investments made in some property or any other type of investments and it could not be the business expenditure. The word investment contained in section 69B deals with investment in bullion, jewellery or other valuable articles, etc. If contention of revenue was accepted and the expression is given wider meaning as is sought to be made out, the provisions of section 69C shall be rendered otiose. [Para 14]

No doubt, need behind inserting section 142A was to empower AO to make a reference to Valuation Officer as there were no such specific powers and existing provisions contained in section 131 were inadequate. However, even statement of objects and reasons clearly confined and limited reference to hold a scientific, technical and expert investigation, etc. If intention was to include unexplained expenditure as contemplated in section 69C as well, this provision should have been specifically mentioned in section 142A. [Para 15]

As per section142A (1) it was clear that the Legislature referred to provisions of sections 69, 69A and 69B, but specifically excluded section 69C. The principle of casus omissus becomes applicable to this situation. What is not included by the Legislature and rather specifically excluded, cannot be incorporated by the Court through the process of interpretation. The only remedy is to amend the provisions. It is not the function of the Court to legislate or to plug the loopholes in the law. [Para 16]

In this case, except the report of the DVO on which AO relied upon, there was nothing on record to suggest that there was any other evidence to disbelieve the expenditure shown by assessee. [Para 17]

Therefore, Tribunal was justified in deleting the addition made by AO and adopting the figure of cost of construction of the project as declared by assessee. [Para 18]

Income-tax Act, 1961 Section 69C read with section 142A

Decision: In favour of Assessee.
A.Y. 1998-99