2013 (1) TMI 629 - HC - Income Tax

Additions u/s 69 - search conducted u/s 132 - notice u/s 153C - valuation of properties referred to District Valuation Officer (DVO) - ITAT deleted the addition - Held that - No reason to differ from the view taken by the Tribunal as no material was found in the search and seizure operations, which would justify the AO s action in referring the matter to the DVO for his opinion on valuation of the said properties. If that be the case, then the valuation arrived at by the DVO would be of no consequence. In any event, the Tribunal has also, on facts, held that the DVO s valuation was based on incomparable sales, which is not permissible in law - in favour of assessee.

Summary

Issues:
1. Valuation of properties for assessment year 2006-07 under Section 69 of the Income Tax Act, 1961.
2. Deletion of additions by the Commissioner of Income Tax (Appeals) and Income Tax Appellate Tribunal.

Analysis:

Issue 1: Valuation of properties for assessment year 2006-07 under Section 69 of the Income Tax Act, 1961.
The respondent/ assessee filed a return declaring an income of Rs. 39,90,410/- in 2006. Subsequently, a search was conducted under Section 132 of the Income Tax Act, 1961, leading to a notice under Section 153C. The Assessing Officer referred the valuation of three properties purchased by the assessee to the District Valuation Officer (DVO). The DVO valued the properties significantly higher than the assessee's declared values. The Assessing Officer made additions under Section 69 based on the differences in valuation. The Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal deleted these additions, finding that there was no material to justify the reference to the DVO and that the DVO's report was based on incomparable sales. They held that the burden was on the revenue to prove the real investment in the properties was greater than the apparent investment, which they failed to do. The Tribunal concluded that the reference to the DVO was not in accordance with the law.

Issue 2: Deletion of additions by the Commissioner of Income Tax (Appeals) and Income Tax Appellate Tribunal.
The Income Tax Appellate Tribunal and the Commissioner of Income Tax (Appeals) both concluded that there was no material found during the search to justify the reference to the DVO for valuation of the properties. They found that the DVO's valuation was based on incomparable sales and could not be relied upon. The burden was on the revenue to show the real investment in the properties exceeded the apparent investment, but they failed to do so. Consequently, both the Tribunal and the Commissioner of Income Tax (Appeals) ruled in favor of the assessee, stating that the reference to the DVO was not in accordance with the law. The High Court upheld this decision, stating that no question of law arose for consideration and dismissed the appeal.

In conclusion, the High Court upheld the decision of the Income Tax Appellate Tribunal and the Commissioner of Income Tax (Appeals) to delete the additions made by the Assessing Officer under Section 69 of the Income Tax Act, 1961. The Court found that the revenue failed to provide sufficient material to justify the reference to the DVO for valuation of the properties, and the DVO's valuation was based on incomparable sales, rendering it unreliable. Therefore, the burden of proof regarding the real investment in the properties was not discharged by the revenue, leading to the deletion of the additions.