2017 (1) TMI 628 - HC - Income Tax

Validity of notice u/s 147 - not giving cognizance to the valuation reports of DVOs as no proceedings was pending for A/Y-1995-96 - Held that - Aforesaid question has already been considered by this Court in M/s Tikaula Sugar Mills Limited Vs. C.I.T. Muzaffar Nagar 2012 (10) TMI 619 - ALLAHABAD HIGH COURT the reference to DVO under Section 142-A is not to make a fishing and roving enquiry into the expenditure in constructions. The AO is not authorised to call for the report of DVO unless he forms an opinion that he cannot rely on the assessee s accounts and rejects the accounts books. The incomplete report of the DVO on the basis of which the assessment was reopened and for which the reasons were recorded on could not be accepted as the material on the basis of which the AO could have formed belief that the assessee-company had not truly disclosed the expenditure of earthwork. The DVO had only raised doubts on the methodology adopted by the assessee for valuation. The AO acted casually in discharging his functions. - Decided in favour of assessee

Summary

Issues:
Validity of notice u/s 148 for Assessment Year 1995-96 & 1996-97

Analysis:
The appeal under Section 260A of the Income Tax Act, 1961, arose from a judgment and order passed by the Income Tax Appellate Tribunal, Delhi Bench 'D'. The substantial question of law in the appeal was whether the Tribunal was justified in holding that the notice u/s 148 was invalid. The Tribunal did not consider the valuation reports of DVOs as no proceedings were pending for A/Y-1995-96, although references to the DVOs were made when the assessment proceedings were pending for A/Y-1996-97.

Sri Ashish Agarwal, counsel for the appellants, and Sri P.K. Jain, counsel for the respondent, referred to a previous judgment by the Court in a similar matter. The Court had ruled in favor of the Assessee in that case. The Court found that the AO had committed a gross error of law in reopening the assessment under Section 147 of the Act. The material regarding the share application money was disclosed in the accounts books, and assessments were finalized based on this information. The Court held that the AO did not have grounds to reopen the assessment based on the disclosed material.

After hearing both parties and examining the records, the High Court concluded that the matter was covered by the previous judgment. Following the reasoning and decision in the previous case, the Court answered the substantial question of law in favor of the Assessee and against the Revenue. Consequently, the appeal was dismissed, affirming the decision in favor of the Assessee based on the previous judgment.