2019 (7) TMI 610 - HC - Income Tax

Unaccounted investment - search and seizure operation u/s 132 wherein an unsigned Agreement to Sell was found - rejection of report of the DVO - HELD THAT - DVO having complete knowledge of the unsigned agreement, which was much lesser than the total amount that was revealed from the two agreements found. It was noted by the ITAT that presumption could only be made under Section 132 (4A) and that too was rebuttable. The matter was referred to the DVO after the seizure of the aforementioned document. The DVO concluded that the property was worth ₹ 7.11 crores and the AO could not have disputed that finding. It was also noted by the ITAT that the sale price on the basis of signed documents is accepted by the department in the hands of sellers of the property or shareholders of Bluebird Software Private Limited. This Court concurs with the ITAT that indeed the AO could not have rejected the report of the DVO since it was at his instance that it was prepared. CIT (A) also appears to have missed this aspect while dismissing the appeal of the Assessee. In light of the report of DVO, there was no justification for the AO to have added ₹ 6,98,00,000/- to the income of the Assessee on the basis of the unsigned documents. The Court finds that the impugned order of the ITAT does not suffer from any legal infirmity and does not give rise to any substantial question of law.

Summary

Issues:
1. Condonation of delay in re-filing the appeal.
2. Justification of deleting the addition of unaccounted investment by the ITAT.
3. Discrepancy in values in different agreements and treatment of unaccounted investment.
4. Validity of the DVO's valuation report and its impact on the AO's decision.
5. Rejection of the AO's addition to the Assessee's income based on unsigned documents.

Analysis:
1. The Court condoned the delay of 252 days in re-filing the appeal, citing reasons provided in the application, and disposed of the delay application.

2. The appeal by the Revenue challenged the ITAT's order deleting the addition of ?6,98,00,000 made by the Assessing Officer. The main issue was whether the ITAT was justified in this deletion.

3. The Assessee's return of income declared ?6,09,466, but during a search operation, agreements were found showing different values for the sale of shares and property. The AO added ?6.98 crores as unaccounted investment, which was upheld by the CIT(A) before the Assessee appealed to the ITAT.

4. The ITAT considered a report by the DVO valuing the property at ?7.11 crores, despite the lower value in the unsigned agreement. The Court agreed that the AO could not reject the DVO's report as it was prepared at his instance, and the CIT(A) overlooked this aspect. The DVO's valuation impacted the justification for adding ?6.98 crores to the Assessee's income.

5. The Court concurred with the ITAT that there was no legal infirmity in their order, as the AO should not have added ?6,98,00,000 based on unsigned documents when the DVO's report provided a different valuation. The appeal was dismissed as it did not raise any substantial question of law.