2010 (7) TMI 1123 - HC - Income Tax

Summary

Issues involved:
The issue involves the legality of taking action under Section 148 of the Income-tax Act, 1961 based on a District Valuation Officer's (DVO) report when the books of account have been accepted.

Judgment Summary:

Facts of the Case:
The Assessee, M/s Sachin Hotels (P) Ltd., started construction of a hotel in July 1997, completed in September 2001. The Assessing Officer referred the matter to the DVO to determine the actual investment made by the Assessee. There was a significant difference in the declared construction value and the DVO's estimate, leading to a reassessment for multiple years.

Decision:
The Commissioner of Income Tax (Appeals)-1 reduced the Assessee's liability, which was further appealed by both parties to the Income Tax Appellate Tribunal (ITAT). The ITAT dismissed the Revenue's appeal and allowed the Assessee's appeal, leading to the current appeal by the Revenue under Section 260 A of the Act for the Assessment Year 1998-99.

Legal Analysis:
The Court clarified that while the Assessing Officer can call for a DVO report without rejecting the books of account, passing a reassessment order solely based on the DVO's report is not permissible. The DVO's report, being an opinion, must be supported by other evidence to justify a reassessment order. The Court cited a Madras High Court case to emphasize that a reassessment order cannot be solely based on the DVO's report.

Conclusion:
In this case, the DVO's report was requested after accepting the Assessee's books of account. Therefore, passing a reassessment order solely based on the DVO's report was deemed improper by the Court. The Court upheld the Tribunal's order and dismissed the Income Tax Appeal by the Revenue, finding no merit in their contentions.

Outcome:
The Income Tax Appeal was dismissed with no order as to costs.