2016 (2) TMI 295 - AT - Income Tax

Reopening of assessment - basis of the valuation report received from the office of the DVO - Held that - As decided in ACIT Vs Dhariya Construction Company 2010 (2) TMI 612 - Supreme Court of India the opinion of the DVO per se is not an information for the purposes of reopening assessment under section 147 of the Income-tax Act, 1961. The Assessing Officer has to apply his mind to the information, if any, collected and must form a belief thereon. In the circumstances, there is no merit in the civil appeal. The Department was not entitled to reopen the assessment - Decided in favour of assessee

Summary

Issues Involved:
Reopening of assessment u/s 147 based on DVO's report.

Analysis:
1. Reopening of Assessment: The department initiated reassessment proceedings u/s 147 based solely on the valuation report from the DVO. The CIT(A) quashed the reassessment, citing various judicial precedents. The CIT(A) emphasized that the valuation report alone cannot be the sole basis for reopening assessments. The Hon'ble Delhi High Court and other judicial authorities have held that the fair market value cannot substitute the full consideration in the sale of property. The CIT(A) highlighted that the AO did not provide any tangible material to show that the market value was significantly higher than the consideration in the sale deeds. The CIT(A) concluded that initiating reassessment solely on the DVO's report without independent findings is unjustified and against the law.

2. Legal Precedents: The CIT(A) referenced several legal judgments to support the decision. The judgment in the case of ACIT Vs Dhariya Construction Company was pivotal. It was established that the opinion of the DVO alone does not constitute valid information for reopening assessments under section 147 of the Income-tax Act, 1961. The Assessing Officer must apply his mind to the information collected and form a belief based on that. The CIT(A) relied on this precedent to quash the reassessment framed by the AO. The CIT(A) also cited the judgment in the case of CIT vs. Sachin Hotels (P) Ltd., emphasizing that a reassessment order cannot be passed purely on the DVO's report without collaborating evidence.

3. Appeal Decision: The appellate tribunal dismissed the department's appeal. The tribunal concurred with the CIT(A)'s decision to quash the reassessment. The tribunal reiterated the importance of independent findings and proper application of mind by the Assessing Officer before reopening assessments. The tribunal aligned its decision with the legal principles established in previous judgments, including the necessity for tangible material to support reassessment actions. Consequently, the tribunal found no merit in the department's appeal and upheld the CIT(A)'s decision.

In conclusion, the judgment emphasized the importance of valid grounds and independent findings for reopening assessments under section 147, highlighting that a valuation report alone cannot justify reassessment. The decision was in line with established legal principles and precedents, ultimately leading to the dismissal of the department's appeal.