2013 (9) TMI 687 - HC - Income Tax

Tribunal is final fact finding authority - Reference to the DVO for valuation of building Held that - A.O. has not specifically rejected the books of account and never pointed out any defects. The assessee submitted the books of account, vouchers, bills of building accounts which were duly examined by the A.O. with due application of mind and the same were never rejected - The reference to the DVO without rejecting the books of account is not desirable However, the Tribunal is a final fact finding authority as per the ratio laid down in the case of Kamla Ganpati vs. Cntroller of Estate Duty, 2001 (2) TMI 132 - SUPREME Court Decided against the Revenue.

Summary

Issues:
Appeals filed under Section 260A of the Income-Tax Act against a common judgment by the Income Tax Appellate Tribunal for the assessment years 2003-04 and 2004-05.

Analysis:
The appeals were admitted based on substantial questions of law regarding the addition of differential cost of construction. The Assessing Officer (A.O.) referred the matter to the Departmental Valuation Officer (DVO) for estimating the cost of construction of a building. The difference in the valuations by the approved valuer and DVO led to additions in the assessment years, which were later deleted by the appellate authorities. The Department contended that the additions were valid as per Section 40-A (3) despite the society being exempted under Section 11 of the Income Tax Act. However, the appellate authorities found no merit in the Department's argument.

The High Court noted that the assessee society benefitted from Sections 11 and 12A of the Income Tax Act. The A.O. had not rejected the books of account or pointed out any defects, and the reference to the DVO without such rejection was deemed inappropriate. The Tribunal's decision was upheld, emphasizing that estimation is a question of fact. The Court cited precedents to support the finality of the Tribunal's factual findings.

The Court concluded that the A.O. did not reject the books of account, and the reference to the DVO without doing so was improper. The Tribunal's decision was upheld, and the substantial questions of law were decided in favor of the assessee. Consequently, both appeals filed by the Department were dismissed.

In summary, the judgment focused on the validity of additions based on differential cost of construction, the significance of rejecting books of account before referring to the DVO, and the finality of Tribunal's factual findings. The decision favored the assessee based on the specific circumstances and legal provisions involved.