2014 (4) TMI 1241 - AT - Income Tax

Reopening of assessment based upon the opinion of the DVO - addition of the difference of amount as disclosed by the assessee and the amount estimated by the DVO - non independent application of mind by AO - HELD THAT - AO had not any other information or reason to believe that the income disclosed by the assessee had escaped assessment except the report of the DVO. The reopening was made merely on the basis of estimation of investment made by the DVO. The Hon ble Supreme Court in the case of ACIT Vs. Dhariya Construction Company 2010 (2) TMI 612 - SUPREME COURT OF INDIA has held that the opinion of the DVO per se is not an information for the purpose of reopening of assessment u/s 147.Such a reopening which is based on merely upon the opinion of the DVO was held to be bad in law. Neither any information nor any such material was in possession of the Assessing Officer from which it could have been gathered that the income of the assessee has escaped assessment nor the Assessing Officer rejected the books of account of the assessee. The addition was made only on the basis of information / estimation of the DVO which per se is not an information for the purpose of reopening of assessment u/s 147 - Decided in favour of assessee

Summary

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

Analysis:
The appellant contested the reopening of assessment under section 147 by the Assessing Officer, relying solely on the Department Valuation Officer's (DVO) report estimating investment in land and building. The appellant argued that the Assessing Officer lacked any other information or reason to believe income had escaped assessment besides the DVO report. Citing legal precedents, the appellant highlighted that the Hon'ble Supreme Court had ruled in similar cases that the DVO's opinion alone does not constitute valid grounds for reopening an assessment. The Supreme Court held that such a reopening, solely based on the DVO's opinion without rejecting the assessee's books of account, is legally flawed. In this case, as no other information or material indicated income escapement, and the books of account were not rejected, the reopening based on the DVO report was deemed unjustified and unlawful. Consequently, the appellate tribunal ruled in favor of the appellant, ordering the deletion of the additions made by the lower authorities.

This detailed analysis underscores the critical issue of reopening assessments under section 147 solely based on a DVO report. The judgment emphasizes the legal requirement for valid grounds supported by concrete evidence beyond the DVO's estimation. It highlights the significance of rejecting the assessee's books of account before relying on the DVO's opinion for reopening assessments. The tribunal's decision aligns with established legal principles set by the Hon'ble Supreme Court, ensuring fair and lawful assessment procedures.