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2021 (6) TMI 362 - AT - Income TaxValidity of jurisdiction assumed by AO u/s 147 - validity of reference made to District Valuation Officer (DVO) u/s 142A - justification of additions towards cost of construction made by the AO on the basis of estimations reached by Valuation officer - HELD THAT - We notice that the CIT(A) has inter alia observe that the books of accounts have not been rejected in the original assessment proceedings. Coupled with this the office note of the AO gives an infallible impression that the AO at the time of original assessment was broadly satisfied with the correctness of the books. While a formal rejection of books may not at times be possibly necessary an abstract position of law an implied dissatisfaction on the books could not be gauged either from the original assessment or from the attendant office note. We also simultaneously notice that CIT(A) has relied upon the decision rendered in the case of Dhariya Construction 2010 (2) TMI 612 - SC ORDER and held that the valuation report of the DVO cannot constitute a reliable piece of evidence. CIT(A) has also made reference to various other judgments and has come to the conclusion that ingredients of Section 147 of the Act are not fulfilled in the instant case and consequently reopening is not permissible in the facts and circumstances of the case - No error in the conclusion drawn by the CIT(A) in holding so. Without repeating the same we decline to interfere with the conclusion drawn by the CIT(A) holding the assumption of jurisdiction by the AO u/s.147 of the Act to be bad in law. Reference to the Valuation Officer u/s 142A - HELD THAT - As not possible for a Valuation Officer to comply with the mandate of reference u/s 142A of the Act viz. (i) issue notice to the assessee for collection of information (ii) enter the premises under subject matter of reference (iii) inspect and examine the contemporaneous position on fair value of the project (iv) apply his mind to the facts available and (v) prepare valuation report. Even after receipt of valuation report the AO is expected to confront the same to the assessee and give him proper opportunity to defend his position on the contents of valuation report. Apparently not possible to complete the assessment on the basis of such valuation report within the available time frame of one month. AO has completed the assessment on provisional basis as an empty formality with an implicit idea to reopen the case at a later stage in the event of deviations reported in the valuation report. This approach is not in sync with quasi judicial task of assessment. Such action cannot be endorsed which may lead to drastic civil consequences that may arise from reopening a completed assessment. The action of the AO u/s 147 based on valuation report is not sustainable in law. We thus see no error in the conclusion drawn by the CIT(A) in this regard. Addition made by AO u/s 69B - CIT(A) has deleted the addition made by AO under s. 69B of the Act on the ground that cost of project declared in the books exceed the fair value determined by the DVO - While granting relief to the Assessee the CIT(A) has inter alia made reference to a tabulated statement showing cost of constructions incurred in various assessment years and observed that the cost of construction as per books stands at 22 90 07, 814/- which is excess of 19, 96, 15 400/- determined by AO based on the valuation report. Where the cost of project as tabulated in the first appellate order shown to be in excess of the value determined by the DVO is found to be true the whole proceedings would fall flat and become otiose. No rebuttal of such factual observations have been made by Revenue. We thus see no reason to interfere with the appellate order of CIT(A) on findings of facts. Appeal of the Revenue is dismissed.
Issues Involved:
1. Validity of jurisdiction assumed by AO under Section 147 of the Income Tax Act, 1961. 2. Validity of reference made to the District Valuation Officer (DVO) under Section 142A of the Income Tax Act, 1961. 3. Justification of additions towards the cost of construction made by the AO based on estimations reached by the Valuation Officer. Issue-wise Detailed Analysis: 1. Validity of jurisdiction assumed by AO under Section 147 of the Income Tax Act, 1961: The Tribunal examined whether the AO had valid reasons to believe that income chargeable to tax had escaped assessment, which is a prerequisite for reopening an assessment under Section 147. The AO had issued notices under Section 148 based on a valuation report received after the completion of the original assessment. The Tribunal noted that the AO did not reject the books of accounts during the original assessment and was broadly satisfied with the correctness of the books. The Tribunal referred to the Supreme Court's decision in ACIT vs. Dhariya Construction Co., which held that the opinion of the DVO per se is not information for the purposes of reopening assessment under Section 147. The Tribunal concluded that the valuation report could not constitute a reliable piece of evidence to justify reopening the assessment and upheld the CIT(A)'s decision that the assumption of jurisdiction under Section 147 was invalid. 2. Validity of reference made to the District Valuation Officer (DVO) under Section 142A of the Income Tax Act, 1961: The Tribunal analyzed whether the reference made by the AO to the DVO under Section 142A was valid without rejecting the books of accounts. The Tribunal referred to the Supreme Court's decision in Sargam Cinema vs. CIT, which held that the AO cannot make a reference to the DVO without rejecting the books of accounts. The Tribunal observed that the AO had not discovered any notable shortcomings in the books of accounts during the original assessment and had not rejected the books before making the reference to the DVO. The Tribunal concluded that the reference to the DVO without rejecting the books of accounts was invalid and upheld the CIT(A)'s decision on this ground. 3. Justification of additions towards the cost of construction made by the AO based on estimations reached by the Valuation Officer: The Tribunal examined the additions made by the AO towards the cost of construction based on the DVO's valuation report. The Tribunal noted that the CIT(A) had observed that the cost of construction as per the books of accounts exceeded the value determined by the DVO. The Tribunal found that the AO had not found any discrepancy in the books of accounts and had not rejected the books before proceeding with the valuation report. The Tribunal upheld the CIT(A)'s decision to delete the additions made by the AO, as the cost of construction declared in the books was higher than the value estimated by the DVO. Conclusion: The Tribunal dismissed the appeals filed by the Revenue, upholding the CIT(A)'s decisions on all grounds. The Tribunal concluded that the reopening of assessments under Section 147 was invalid, the reference to the DVO under Section 142A was invalid without rejecting the books of accounts, and the additions towards the cost of construction based on the DVO's valuation report were unjustified.
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