2017 (12) TMI 351 - AT - Income Tax

Additions u/s 69 - Unexplained investments - Undervaluation of property - addition based upon the DVO s report - absence of any corroborative evidence - Held that - It is not disputed that a readymade building was purchased by the assessee; that no evidence was found during the course of search action conducted at the residential premises of the assessee and other family members warranting such assessment proceedings in the case of assessee; that the assessee had purchased a constructed residential house as detailed in the purchase deed; that no construction was carried out after the purchase of the property on 16.09.2007; and that no evidence that after the purchase of the property on 16.09.2007 either any investment was made by the assessee or investment is found recorded in its books of accounts either during the course of search of the assessee s residence and business premises or thereafter during the course of assessment proceedings or even in the DVO s enquiry proceedings. Thus we hold that the AO could not tax the said amounts merely based upon the DVO s report in the absence of any corroborative material to point out under-valuation of the property in question. Therefore we accept the grievance of the assessee as justified. Accordingly the impugned orders of the ld CIT(A) are reversed and the additions are hereby deleted for all the Assessment Years i.e. from A.Y. 2007-08 to 2013-14. - Decided in favour of assessee.

Summary

Issues Involved:
1. Confirmation of additions based on the Departmental Valuer's report.
2. Competence of the Assessing Officer to invoke section 142A.
3. Validity of the Departmental Valuer's report as sole evidence for additions.
4. Absence of corroborative evidence supporting the Departmental Valuer's report.

Issue-wise Detailed Analysis:

1. Confirmation of Additions Based on the Departmental Valuer's Report:
The primary issue in all six assessment years (2008-09 to 2013-14) was the confirmation of additions based on the Departmental Valuer’s report. The assessee argued that the additions were made without any evidence, solely on the basis of the Departmental Valuer’s report, which stated that the property underwent significant alterations and additions after its purchase. The assessee contended that these claims were baseless and lacked supporting evidence.

2. Competence of the Assessing Officer to Invoke Section 142A:
The CIT(A) confirmed the additions, referencing Section 153A of the Act, which allows the Assessing Officer to invoke Section 142A to obtain a valuation from the District Valuation Officer. The CIT(A) asserted that it was within the Assessing Officer’s competence to seek such a valuation to ensure the correct total income was assessed. The CIT(A) deemed the house property itself as documentary evidence justifying the valuation.

3. Validity of the Departmental Valuer's Report as Sole Evidence for Additions:
The assessee’s counsel argued that the valuation report alone could not justify the additions. The counsel cited several judicial precedents, including ‘CIT Vs Bajrang Lal Bansal’ and ‘CIT Vs Abhinav Kumar Mittal’, where courts held that the Departmental Valuer’s report alone does not constitute sufficient information for making additions in the absence of any incriminating evidence found during a search.

4. Absence of Corroborative Evidence Supporting the Departmental Valuer's Report:
The Tribunal noted that no evidence was found during the search to support the claim that the assessee made any unrecorded investments in the property after its purchase. The Tribunal highlighted that the Departmental Valuer’s report lacked credibility as it was based on assumptions without any corroborative evidence. The Tribunal referenced multiple cases, including ‘CIT Vs Nishi Mehra’ and ‘CIT-I Vs. Berry Plastics (p.) Ltd’, where it was held that valuation reports without supporting evidence could not justify additions under Section 69B.

Conclusion:
The Tribunal concluded that the Assessing Officer could not rely solely on the Departmental Valuer’s report to make additions in the absence of any corroborative material evidence indicating under-valuation of the property. Consequently, the Tribunal reversed the CIT(A)’s orders and deleted the additions for all the assessment years from 2008-09 to 2013-14. All the appeals by the assessee were allowed.

Order Pronouncement:
The order was pronounced in the open Court on 29/09/2017.