2009 (12) TMI 633 - AT - Income Tax

Income escaping assessment - change of opinion - reason to believe - held that - In the instant case, the District Valuation Officer s report constitutes relevant material in order to enable the Assessing Officer to form an opinion that income has escaped assessment. - it is not a case of change of opinion - decided in favor of revenue. Un-explained investment has escaped assessment under section 69 - addition under section 69 on the basis of valuation done by the Departmental Valuer under section 142A of the Act - Purchase price has not been fully disclosed in the books of the assessee Held that - value of property has not been disclosed fully by the assessee in the books of account, it is covered by the provisions of section 69B and consequently, the Assessing Officer was justified in making the reference under section 142A of the Act. Accordingly, we do not find any infirmity in the order of the learned Commissioner of Income-tax (Appeals) confirming the action of the Assessing Officer for making reference under section 142A of the Act. Valuation on the basis of property in a locality - remote area or same locality - held that - Since the Punjabi Bagh and Rajouri Garden are at a distance of 2-3 kms. and located near the Ring Road, the land price of the area would be identical. Since the District Valuation Officer has relied on the price of land sold in 1999 subject to certain modification at Rs. 17,186, in our considered opinion, in the absence of negative points, the price adopted by the District Valuation Officer has to be upheld. Adjustment in the price - discount in value - CIT(A) allowed 20% discount - held that - CIT(A) has not given any reasons for reduction in the value of the land as well as the building, the reduction allowed by the learned Commissioner of Income-tax (Appeals) is not justified. - Decided against the assessee and in favor of revenue.

Issues Involved:

1. Validity of proceedings under section 148.
2. Consideration of property as stock-in-trade and applicability of section 69.
3. Invocation of section 142A for property valuation.
4. Comparison of property value with remote areas.
5. Arbitrary calculation of addition.
6. Legality and jurisdiction of the appellate order.

Issue-wise Detailed Analysis:

1. Validity of proceedings under section 148:

The assessee argued that the reopening of assessment under section 148 was invalid as it was based on the valuation report received after the original assessment. The Commissioner of Income-tax (Appeals) held that the report from the District Valuation Officer (DVO) constituted valid information for reopening the assessment under section 147. The Tribunal upheld this view, noting that the report provided a prima facie basis for the belief that income had escaped assessment, as supported by the Supreme Court's decision in Raymond Woollen Mills Ltd. v. ITO.

2. Consideration of property as stock-in-trade and applicability of section 69:

The assessee contended that the property was stock-in-trade and not an investment, thus section 69 was not applicable. The Commissioner of Income-tax (Appeals) and the Tribunal both rejected this argument, stating that section 142A can be invoked for both investments and stock-in-trade. The Tribunal emphasized that section 69B applies to any valuable article, including stock-in-trade, if the expenditure exceeds the amount recorded in the books of account.

3. Invocation of section 142A for property valuation:

The assessee challenged the reference to the DVO under section 142A, arguing it was based on conjecture. The Tribunal supported the Commissioner of Income-tax (Appeals)'s decision, stating that the DVO's report provided sufficient material for reopening the assessment. The Tribunal also noted that section 142A allows the Assessing Officer to refer to the DVO for estimating the value of any investment or valuable article, thus validating the reference.

4. Comparison of property value with remote areas:

The assessee argued that the DVO used sale instances from a remote area (Punjabi Bagh) rather than the same locality (Rajouri Garden). The Commissioner of Income-tax (Appeals) and the Tribunal found that both areas were similar and located near the Ring Road, justifying the comparison. The Tribunal upheld the DVO's valuation, noting that the rates in 2003-04 were higher than in 1999, and the comparative sale instance method was appropriately applied.

5. Arbitrary calculation of addition:

The Tribunal found that the Commissioner of Income-tax (Appeals) had reduced the valuation of land and building without sufficient reasons. The Tribunal restored the Assessing Officer's original valuation, emphasizing that the reduction allowed by the Commissioner of Income-tax (Appeals) was not justified due to lack of detailed reasoning.

6. Legality and jurisdiction of the appellate order:

The assessee argued that the appellate order was arbitrary and illegal. The Tribunal dismissed this contention, finding no infirmity in the Commissioner of Income-tax (Appeals)'s decision to uphold the reference to the DVO and the subsequent addition based on the valuation report.

Conclusion:

The Tribunal dismissed the assessee's appeal and allowed the Revenue's appeal, restoring the Assessing Officer's original addition based on the DVO's valuation report. The Tribunal held that the reopening of assessment was valid, section 142A was appropriately invoked, and the comparison of property values was justified. The Commissioner of Income-tax (Appeals)'s reduction in valuation was deemed arbitrary and unjustified.

← Previous Next →