2014 (8) TMI 1033 - AT - Income Tax

Reference to DVO - Held that - We are not inclined to interfere with the finding of CIT(A) who has deleted the addition made by the Assessing Officer by accepting the assessee s contention that no reference could be made by the Assessing Officer if the value declared by the assessee is more than the Fair Market Value. - Decided in favour of assessee

Summary

Issues Involved:
1. Deletion of addition made by the Assessing Officer (AO) based on the assessee's valuation.
2. Reference to the Departmental Valuation Officer (DVO) under Section 55A of the Income Tax Act, 1961.
3. Validity of the valuation adopted by the AO.
4. Admissibility of the DVO's report as evidence.

Issue-wise Detailed Analysis:

1. Deletion of Addition Made by the Assessing Officer:
The Revenue's appeal contested the Commissioner of Income Tax (Appeals) [CIT(A)]'s decision to delete the addition made by the AO. The AO had increased the assessee's declared income from Rs. 3,57,403/- to Rs. 1,61,62,110/- based on the valuation of land sold. The CIT(A) ruled in favor of the assessee, leading to the Revenue's appeal.

2. Reference to the Departmental Valuation Officer (DVO) under Section 55A:
The AO had relied on a DVO report from a similar case to determine the Fair Market Value (FMV) of the property as of 01.04.1981. The CIT(A) found that the AO had no power to make such a reference under Section 55A unless the value declared by the assessee was less than what the AO believed to be the FMV. This interpretation was supported by precedents such as CIT vs. Daulal Mohta HUF and CIT v Puja Prints.

3. Validity of the Valuation Adopted by the AO:
The AO adopted a valuation of Rs. 101 per sq. mtr. based on the DVO report for another property, while the assessee had used Rs. 560 per sq. mtr. based on a Government Approved Valuer's report. The CIT(A) found that the AO's valuation was not justified as it was based on a different property and the DVO report was not shared with the assessee. The ITAT upheld the CIT(A)'s decision, noting that the AO had no grounds to challenge the valuation provided by the Government Approved Valuer.

4. Admissibility of the DVO's Report as Evidence:
The CIT(A) and ITAT both ruled that the DVO's report could not be used as it was obtained for a different property and was not shared with the assessee. The ITAT cited various judgments, including those from the Bombay High Court and Gujarat High Court, to support the view that the AO could not rely on the DVO's report without proper reference under Section 55A.

Conclusion:
The ITAT upheld the CIT(A)'s decision to delete the addition made by the AO. It was concluded that the AO had no authority to refer to the DVO's report under Section 55A since the value declared by the assessee was not less than the FMV. The appeals filed by the Revenue were dismissed, affirming the CIT(A)'s findings.

Pronouncement:
The judgment was pronounced in the open court on 27th August 2014, dismissing all the appeals filed by the Revenue.