2013 (10) TMI 82 - HC - Income Tax

Additions made by the Assessing Officer u/s 69 - Additions on the basis of report of DVO when the matter was referred to DVO u/s 142A Held that - A.O. has not specifically rejected the books of account and never pointed out any defects Reliance has been placed upon the judgment of the Hon ble Apex court in the case of Sargam Cinema Vs. Commissioner of Income-Tax 2009 (10) TMI 569 - Supreme Court of India , wherein it has been observed that the Assessing Authority could not refer the matter to the Departmental Valuation Officer in a case where there was a categorical finding recorded by the Tribunal that the books of account were never rejected Decided against the Revenue.

Summary

Issues:
1. Validity of reference to District Valuation Officer under Section 131(1)(d) of the Income-Tax Act.
2. Addition made by Assessing Officer without rejecting books of account under Section 69 of the Income-Tax Act.

Analysis:

Issue 1: Validity of reference to District Valuation Officer
The appeal was filed against the judgment of the Income Tax Appellate Tribunal regarding the validity of the reference made under Section 131(1)(d) of the Income-Tax Act to the District Valuation Officer. The Department contended that the assessee had shown lesser investment in a factory building, leading to a reference under Section 142A to the DVO. The Department argued that the Tribunal's decision upholding the reference was incorrect. However, the counsel for the assessee supported the impugned order. The Court observed that the A.O. had not rejected the books of account and made the addition based on the DVO's report. It was noted that the reference to the DVO without rejecting the books of account was not desirable. Citing precedent, the Court emphasized that estimation is a question of fact, and the Tribunal is the final fact-finding authority. Referring to relevant case law, the Court upheld the Tribunal's decision, emphasizing that the Assessing Authority cannot refer the matter to the DVO if there is no rejection of books of account.

Issue 2: Addition made without rejecting books of account
The second issue revolved around the addition made by the Assessing Officer without rejecting the books of account under Section 69 of the Income-Tax Act. The CIT(A) had deleted the addition, which was confirmed by the Tribunal. The Department argued that the A.O. had not rejected the books of account, justifying the addition. However, the Court noted that the A.O. had not specifically rejected the books of account and never pointed out any defects. The Court highlighted that the Tribunal is the final fact-finding authority and cited relevant case law to support its decision. Ultimately, the Court found no reason to interfere with the Tribunal's order and dismissed the appeals filed by the Department.

In conclusion, the High Court upheld the Tribunal's decision, ruling in favor of the assessee on both issues. The Court emphasized the importance of proper assessment procedures, including the rejection of books of account before making additions, and reiterated the Tribunal's authority as the final fact-finding body in such matters.