2005 (11) TMI 58 - HC - Income Tax

Additions on the basis of the report of the Valuation Officer - Tribunal has recorded a clear finding of fact that the search on tbe premises of the assessee did not lead to the seizure of any incriminating evidence to suggest that any income had not been disclosed or would not have been disclosed for tax purpose under the Income-tax Act, 1961. It has, on that finding, held that the Assessing Officer was not justified in making additions on the basis of the report of the Valuation Officer in regard to two of the properties purchased by the assessee. held that there was no justification in the action of AO in treating the undisclosed investment or profit in respect of properties whose valuation has been done by the AO himself and treating the same as part of the peak for working out undisclosed income of the block period. The Assessing Officer himself is not an expert; the valuation of the property was a technical matter. AO is not entitled to make statements on technical matters for which there is no material on record, particularly when no evidence was found as a result of action u/s 132(1) on the assessee regarding undisclosed income in respect of all the properties under consideration

Summary

Issues:
Assessing Officer's addition based on Valuation Officer's report without incriminating evidence during search.

Analysis:
The High Court judgment dealt with the issue of the Assessing Officer making additions based on the Valuation Officer's report without any incriminating evidence found during the search on the assessee's premises. The Tribunal had found that no evidence was discovered during the search to suggest undisclosed income or property under the Income-tax Act, 1961. The Tribunal held that the Assessing Officer was unjustified in adding the values estimated by the Departmental Valuation Officer for two properties purchased by the assessee. The Tribunal emphasized that Chapter XIV-B, which pertains to the special procedure for assessment of search cases, is a self-contained code, and additions cannot be made solely on the basis of the Valuation Officer's report without concrete evidence of undisclosed income. The court highlighted that the Assessing Officer, not being an expert in property valuation, lacked the authority to make statements on technical matters without supporting evidence, especially when no undisclosed income was found during the search. The judgment referenced the decision in Saraswati Industrial Syndicate Ltd. v. CIT [1999] 237 ITR 1 to support the position that additions cannot be made without evidence of undisclosed income.

The court further aligned its decision with previous rulings in CIT v. Ravi Kant Jain [2001] 250 ITR 141 and CIT v. Sudhish Kumar [2005] 276 ITR 563. It concluded that no substantial question of law arose for consideration in this case, leading to the dismissal of the appeal. The judgment emphasized the importance of concrete evidence and adherence to legal procedures in making additions to undisclosed income, particularly in cases involving property valuation without incriminating findings during a search operation.