2012 (10) TMI 788 - AT - Income Tax

Unexplained investments - Difference in valuation shown by the assessee and determined by DVO - reopening of assessment - CIT(A) deleted the addition - Held that - Assessee has not disputed the fact that except the letter dated 06.06.2008, he did not submit any information or explanation in response to the notices and questionnaire issued by the AO, thus AO had no option but to call the report from the DVO about the valuation of the property purchased by the assessee on 11.8.2005 to verify the consideration declared by the assessee. Therefore, AO rightly proceeded to call the report from the DVO with regard to valuation and verification of the consideration of the property purchased by the assessee. As per the CIT(A) s Order the issue was related to the property in Mayurdhawaj Apartments, Patpar Ganj, Delhi, but the issue in the present appeal is related to the property purchased by the assessee in Darya Ganj, New Delhi. Furthermore, the assessee filed a copy of sale deed related to property purchased during the AY 2004-05 before ITAT E Bench but on careful perusal of the orders of the authorities below, it is observed that the assessee has not filed a copy of the registered sale deed in his favour either before the authorities below or before us. AO called a DVO report on compelling circumstances and at the same time did not confront the same to the assessee as per provisions of Section 142A(3), thus the impugned order is cryptic and not well-reasoned. Therefore, it is appropriate to restore the issue to the file of AO with a direction to decide the issue de novo following the provisions of Section 142A, inter alia provisions of Section 56(2) - in favour of revenue for statistical purposes.

Summary

Issues:
- Addition of Rs.15,89,956 as unexplained investment in property valuation.

Analysis:

The appeal was filed by the Revenue against the order of the Commissioner of Income Tax(A)-XV, New Delhi for AY 2006-07 regarding the addition of Rs.15,89,956 made by the Assessing Officer on account of variation in valuation shown by the assessee and determined by the DVO. The Assessing Officer reopened the case under sections 147 and 148 of the Income Tax Act, 1961, concerning the purchase of a property in Darya Ganj, New Delhi. The DVO valued the property at Rs.25,89,956 against the declared consideration of Rs.10 lakh by the assessee, leading to the addition of Rs.15,89,956 as unexplained investment in the property. The Commissioner of Income Tax(A) partly allowed the appeal, emphasizing the lack of material evidence for the addition and the absence of valid reasons for referring the valuation to the DVO.

The Revenue argued that the assessee's non-cooperation forced the Assessing Officer to seek a report from the DVO, justifying the addition as unexplained investment. The Revenue contended that the Commissioner of Income Tax(A) disregarded the DVO report and failed to acknowledge the necessity of the valuation. The assessee's representative countered, alleging arbitrary assessment and violation of natural justice by the Assessing Officer. The Tribunal noted the lack of cooperation from the assessee and the failure to provide detailed responses, leading to the DVO valuation without affording the assessee an opportunity to respond.

The Tribunal found that while the Assessing Officer was justified in seeking the DVO report due to the lack of cooperation from the assessee, the failure to provide the report to the assessee and allow a hearing violated principles of natural justice. The Tribunal criticized the Commissioner of Income Tax(A) for not providing a detailed reasoning for the decision and not adequately addressing the lack of evidence for unexplained investment. Given the lack of a well-reasoned order and the failure to confront the DVO report to the assessee, the Tribunal decided to remand the issue back to the Assessing Officer for a fresh decision in compliance with the relevant provisions of the Income Tax Act.

In conclusion, the Tribunal allowed the Revenue's appeal for statistical purposes, emphasizing the need for a fair and reasoned assessment process in determining unexplained investments in property valuations.