2010 (5) TMI 681 - AT - Income Tax

Summary

Issues Involved:
1. Validity of assessment orders passed u/s 144 based on DVO's report.
2. Justification of cancellation of assessment orders in light of judicial precedents.
3. Legitimacy of reopening assessments u/s 148 based solely on DVO's report.

Summary:

Issue 1: Validity of assessment orders passed u/s 144 based on DVO's report

The Department appealed against the cancellation of assessment orders passed u/s 144 of the IT Act, which were based on the DVO's report. The Assessing Officer initiated proceedings u/s 148 due to discrepancies between the DVO's valuation and the investment shown by the assessee in the books of account. The CIT(A) cancelled these assessment orders, deeming the reopening as bad in law.

Issue 2: Justification of cancellation of assessment orders in light of judicial precedents

The CIT(A) relied on the Allahabad High Court's decision in Fusion Electronics (P.) Ltd. and other cases like CIT v. Suresh Kumar and CIT v. V.T. Rajendran, which held that reopening assessments solely based on the DVO's report was invalid. The Tribunal upheld this view, emphasizing that valuation is a matter of opinion and cannot be the sole basis for reopening assessments.

Issue 3: Legitimacy of reopening assessments u/s 148 based solely on DVO's report

The Tribunal noted that the Assessing Officer issued notices u/s 148 solely based on the DVO's report without applying his own mind. Citing various judicial precedents, including the Supreme Court's decision in Dhariya Construction Co., the Tribunal held that the DVO's opinion alone does not constitute valid information for reopening assessments u/s 147. Consequently, the reassessment proceedings were deemed invalid.

Conclusion:

The Tribunal dismissed the Department's appeals, affirming that the CIT(A) was justified in cancelling the assessment orders passed by reopening the assessments solely based on the DVO's report. The Tribunal emphasized that the Assessing Officer must apply his own mind and cannot rely solely on the DVO's valuation for reopening assessments.