2015 (6) TMI 355 - AT - Income Tax

Unexplained investment - CIT(A) deleted the addition - Held that - The cost incurred by the assessee on construction of college building at Nagasala, Jadcharla was duly reflected in its books of account regularly maintained for the relevant years including the years under consideration. A perusal of the assessment order passed by the Assessing Officer, however, shows that neither any specific or material defect has been pointed out by the Assessing Officer in the books of account maintained by the assessee or in the bills/vouchers maintained in support of construction cost, nor has he rejected the books of account of the assessee, and this position is not disputed even by the Learned Departmental Representative at the time of hearing before us. Thus the books of account disclosing the cost of construction of college building, were never rejected by the Assessing Officer, we find ourselves in agreement with the learned CIT(A) that the reference made by the Assessing Officer to the DVO for estimating the cost of construction itself was not valid and the additions made on the basis of the said report for both the years under consideration are not sustainable - Decided in favour of assesse.

Summary

Issues:
Appeals by Revenue against CIT(A) orders for assessment years 2007-08 and 2010-11 regarding unexplained investments in college building construction.

Analysis:
The appeals involved the deletion of additions made by the Assessing Officer to the total income of the assessee on account of unexplained investments in college building construction for assessment years 2007-08 and 2010-11. The Assessing Officer added amounts based on a valuation report by the Departmental Valuation Officer, estimating the construction cost higher than the one disclosed by the assessee. The CIT(A) deleted the additions citing various reasons, including that the Assessing Officer did not reject the books of account or point out any defects, and the reference to the Valuation Officer was unjustified. The CIT(A) also referred to legal precedents where valuation reports could not be relied upon without rejecting books of account. The Tribunal upheld the CIT(A)'s decision, emphasizing that the Assessing Officer's reference to the Valuation Officer was invalid as the books of account were not rejected, following judicial pronouncements and the facts of the case.

The Tribunal noted that the cost of construction was duly reflected in the assessee's books of account without any defects pointed out by the Assessing Officer. Referring to a previous case, it was established that when no defects were found in the books of account, a reference to the Departmental Valuation Officer was not valid. The Tribunal agreed with the CIT(A) that the additions based on the Valuation Officer's report were not sustainable. The appeals by the Revenue were dismissed, affirming the CIT(A)'s decision to delete the additions made by the Assessing Officer regarding unexplained investments in the college building construction for the relevant assessment years.

In conclusion, the Tribunal's judgment upheld the CIT(A)'s decision to delete the additions made by the Assessing Officer to the assessee's total income for the assessment years 2007-08 and 2010-11. The Tribunal emphasized the importance of validly rejecting books of account before referring to a Valuation Officer and highlighted the need for corroborative material to support such additions. The legal precedents cited supported the decision to dismiss the Revenue's appeals based on the lack of adverse material found during the survey and the Assessing Officer's failure to point out discrepancies in the books of account.