2014 (12) TMI 351 - AT - Income Tax

Validity of reopening of assessment u/s 147 Reopening made on the basis of DVO s report - Held that - The assessments were reopened on the basis of the DVO s report and the assessments were completed u/s 147 read with 144 of the Act and in some cases under section 143 of the Act in assessee s own case it has been already decided that reopening was done on the basis of the DVO s report, therefore, the reopening is bad in law AO was of the believe that some income has escaped assessment is only on the basis of DVO report because he has worked out the difference in the amount of investment as per the investment declared by the assessee and as per DVO report CIT(A) has given a clear finding that there was no reason available with the AO except the report of a valuer which showed the valuation of the building higher than the investment disclosed by the assessee - the only basis regarding the AO s belief that some income has escaped assessment, is DVO s report only relying upon Assistant Commissioner of Income-tax Vs Dhariya Construction Co. 2010 (2) TMI 612 - Supreme Court of India wherein it was held that the opinion given by the District Valuation Officer is not per se information for the purpose of reopening an assessment u/s 147 of the Income-tax Act - in all the AYs the reopening was done by the AO on the basis of same DVO s report - once reference itself is held to be invalid or bad, the DVO s report obtained consequent thereto cannot be used for reopening of the assessment thus, the reopening is bad as the reopening of the assessment on the basis of the valuation report Decided against revenue.

Summary

Issues:
Challenges to assessment orders under section 147 of the Income-tax Act, 1961 based on DVO's report; Validity of reopening of assessments; Reference to DVO without rejecting books of account.

Analysis:

1. The appeals were filed by the assessee and the Revenue against the order of the ld. CIT(A) challenging the assessment orders under section 147 of the Income-tax Act, 1961. The common factor in these appeals was that they emanated from the assessment order framed under section 147 read with section 144 of the Act.

2. The reopening of assessments in various years was based on the valuation report received from the DVO. The Tribunal had previously held that reopening solely on the basis of the DVO's report was not valid. The Assessing Officer had not applied his mind before making references to the DVO, rendering the reopening and consequent assessments invalid.

3. The ld. D.R. relied on the orders of the ld. CIT(A) and the Assessing Officer without disputing the factual aspects highlighted by the assessee's counsel. The Tribunal found that all assessments were reopened based on the DVO's report, similar to the assessment year 2002-03, where the Tribunal had quashed the assessment due to invalid reopening.

4. The Assessing Officer's belief that income had escaped assessment was solely based on the DVO's report, as seen from the reasons recorded. The CIT(A) had annulled the assessment order, stating that the reasons for reopening were insufficient and not valid, as they were solely reliant on the valuer's report.

5. The reopening of assessments in all years based on the same DVO's report was considered covered by the Tribunal's earlier order. Additionally, the reference to the DVO was deemed invalid as it was made without rejecting the books of account, as required by law.

6. Consequently, the Tribunal quashed all assessments framed consequent to the invalid reopening based on the valuation report. The cross objection by the assessee was dismissed as it had become infructuous. The appeals of the Revenue were dismissed, and those of the assessee were allowed.

This detailed analysis covers the issues involved in the legal judgment, focusing on the challenges to assessments, the validity of reopening based on the DVO's report, and the reference to the DVO without rejecting the books of account.