2001 (10) TMI 759 - AT - Income Tax

Summary

Issues Involved:
1. Reopening of assessment under section 147 of the Income Tax Act.
2. Validity of reference to the District Valuation Officer (DVO) for property valuation.
3. Addition to income based on DVO's valuation reports.
4. Applicability of section 69B of the Income Tax Act.

Detailed Analysis:

1. Reopening of Assessment under Section 147:

The primary issue in the assessee's appeal was the reopening of the assessment under section 147. The original assessment was completed on 31-3-1989. The reopening was based on the DVO's valuation reports received after the original assessment. The assessee argued that references to the DVO for the Malad and Goregaon properties were made after the assessment was completed, and for the Jogeshwari property, the reference was made just two days prior to the assessment completion. Citing the Gauhati High Court's decision in Bhola Nath Majumdar v. ITO, it was contended that a valuation report is merely an opinion and does not constitute 'information' under section 147(b), nor can it form the basis for 'reason to believe' under section 147(a). The Tribunal agreed, stating that the reopening based on the DVO's reports was invalid as the references were made post-assessment, making them inadmissible for reopening.

2. Validity of Reference to the DVO for Property Valuation:

The Tribunal examined whether the references to the DVO were valid. It was found that the references for the Malad and Goregaon properties were made after the assessment was completed, rendering them invalid. For the Jogeshwari property, although the reference was made before the assessment completion, the Tribunal noted that the DVO's report could not be the basis for reopening, as it is merely an opinion and not 'information' under section 147. The Tribunal cited various case laws supporting this view, including decisions from the Calcutta High Court and the Bombay High Court.

3. Addition to Income Based on DVO's Valuation Reports:

The Assessing Officer had made ad hoc additions to the value of the Malad and Goregaon properties based on the DVO's valuation reports, which were received after the assessment. The CIT(A) had deleted these additions, noting that the assessment could not be framed on a tentative basis and that the DVO's valuation for a date beyond the actual investment date was irrelevant. The Tribunal upheld the CIT(A)'s decision, emphasizing that no addition could be made based on a valuation report received post-assessment.

4. Applicability of Section 69B:

The assessee argued that section 69B, which deals with unexplained investments, was not applicable as the properties were recorded in the books of account as stock-in-trade. The Tribunal did not delve deeply into this issue, as it had already invalidated the reopening of the assessment. However, it noted the assessee's contention that section 69B applies where investments are not recorded in the books, which was not the case here.

Conclusion:

The Tribunal concluded that the reopening of the assessment was invalid, as it was based on DVO's valuation reports received after the original assessment. Consequently, the reopening was cancelled, and the appeal filed by the assessee was allowed, while the appeal by the revenue was dismissed. The Tribunal did not find it necessary to address the other grounds raised, given the invalidation of the assessment reopening.