2017 (1) TMI 1832 - HC - Income Tax

Validity of additions based on valuation report - Referring the matter to DVO without first rejecting the books of account - Whether ITAT erred in holding that the books of account has to be rejected before referring to the D.V.O. u/s 142A? - HELD THAT - A similar question has already been decided by this Court against Revenue in M/s Sahyog Jan Kalyan Samiti, Kanpur) decided 2016 (9) TMI 1668 - ALLAHABAD HIGH COURT following Supreme Court judgment in Sargam Cinema 2009 (10) TMI 569 - SC ORDER wherein held Matter could not refer to the Departmental Valuation Officer without the books of account being rejected. Decided in favour of assessee.

Summary

Issues:
Appeal arising from Income Tax Appellate Tribunal judgment related to Assessment Years 2005-06, 2007-08, 2008-09, and 2004-05. Substantial question of law regarding the rejection of books of account before referring to the D.V.O. u/s 142A.

Analysis:
The High Court heard arguments from both parties, the Revenue represented by Mr. Sidharth Dhaon and the Assessees by Sri Abhinav Mehrotra. The appeals stemmed from a judgment by the Income Tax Appellate Tribunal, Lucknow Bench 'B', Lucknow, pertaining to different Assessment Years. The key issue revolved around whether the Tribunal erred in law by rejecting the books of account before involving the D.V.O. u/s 142A, disregarding certain legal precedents.

The substantial question of law formulated in the appeals questioned the Tribunal's decision in light of the case of Bharathi Cement Corporation Ltd. Vs. CIT and the decision of the division bench of Uttrakhand High Court in the case of CIT Vs. Bhavani Shankar Vyas. The Court noted that a similar issue had been decided against the Revenue in a previous case, citing the Supreme Court judgment in Sargam Cinema Vs. Commissioner of Income Tax.

The Revenue argued that a judgment from the Andhra Pradesh High Court presented a different view, referencing the case of Bharathi Cement Corporation Pvt. Ltd. Vs. Commissioner of Income Tax. However, the Court found that the Andhra Pradesh High Court's judgment did not provide clarity on the matter, especially in comparison to the Supreme Court's decision in Sargam Cinema case.

The Court highlighted that the facts in the Sargam Cinema case were not adequately presented, leading to a misunderstanding. In contrast, the Court's own judgment in a previous case confirmed the applicability of the law laid down in the Sargam Cinema case. Therefore, the Court ruled against the Revenue based on its previous decision.

Ultimately, the Court dismissed all the appeals based on the analysis and conclusions drawn from the legal arguments presented by both parties and the precedents cited.