2012 (12) TMI 805 - AT - Income Tax

Reopening of Assessment report of the DVO in respect of construction of the building by the assessee - Held that - As decided in ACIT Vs. Dhariya Constructions Co. 2010 (2) TMI 612 - SUPREME COURT OF INDIA mere opinion of the DVO in relation to the cost of construction of the building owned by the assessee, in the absence of any other information collected against the assessee is not an information and reopening of assessment by way of proceedings under section 147/148 are invalid and are hereby cancelled. Consequently, the assessment order passed under section 143(3) r.w.s. 147 in the present case is hereby cancelled - all the four appeals relating to assessment years 2001-02 to 2005-06 filed by the assessee are allowed - against revenue.

Summary

Issues Involved:
Initiation of reassessment proceedings under section 147/148 of the Income Tax Act based on the report of the District Valuation Officer (DVO).

Detailed Analysis:

Issue 1: Validity of Reassessment Proceedings
The reassessment proceedings were initiated based on a survey conducted at the business premises of the husband of the assessee. The Assessing Officer referred the matter of valuation of the cost of construction to the DVO, who determined the cost of construction at a higher value than the Registered Valuer's estimate. The reasons for reopening the assessment were solely based on the DVO's report. The Hon'ble Supreme Court in ACIT Vs. Dhariya Constructions Co. and the Lucknow Bench in ITO Vs. Shree Ram Verma held that the DVO's report alone cannot be the basis for reopening an assessment. In this case, as no incriminating evidence was found against the assessee during the survey, the Tribunal concluded that the reassessment proceedings were invalid and canceled the assessment order under section 143(3) r.w.s. 147 of the Act.

Issue 2: Lack of Incriminating Evidence
The Tribunal noted that during the survey, no incriminating evidence was found against the assessee regarding any investment in the construction of the property beyond her known sources of income. The initiation of reassessment proceedings solely based on the DVO's report without any additional information or evidence against the assessee was deemed invalid.

Conclusion:
The Tribunal allowed all four appeals filed by the assessee for the assessment years 2001-02, 2002-03, 2004-05, and 2005-06, as the reassessment proceedings initiated solely on the basis of the DVO's report were found to be invalid. The Tribunal canceled the assessment order under section 143(3) r.w.s. 147 of the Act, following the principles established by the Hon'ble Supreme Court and the Lucknow Bench.