2014 (4) TMI 860 - HC - Income Tax

Addition u/s 69B of the Act Unexplained investment in house property Reference made to DVO - Held that - The Tribunal rightly deleted the entire addition primarily on the ground that the AO could not have made reference to the DVO without reference to the books of accounts and such reliance on the DVO s books of accounts was not justified GOODLUCK AUTOMOBILES PVT LTD Versus ASSTT COMMISSIONER OF INCOME TAX 2012 (9) TMI 157 - Gujarat High Court - there was no material, what to say an incriminating material, in the possession of the Revenue Department - the entire addition being merely based upon the estimation of DVO was baseless is set aside thus, there is no need to interfere in the findings arrived at by the authorities Decided against Revenue.

Summary

Issues:
Appeals arising from a common judgment of the Income-tax Appellate Tribunal for the assessment year 2005-06; Deletion of addition under section 69B for unexplained investment in house property; Validity of making a reference to the DVO without rejecting books of accounts.

Analysis:
1. The appeals before the High Court stemmed from a common judgment of the Income-tax Appellate Tribunal concerning the assessment year 2005-06. The dispute arose from cross-appeals where the assessee's appeal was allowed, and that of the Revenue was rejected, leading to the Revenue filing separate appeals.

2. The primary issue raised by the Revenue was whether the Tribunal erred in law by deleting the addition of Rs. 10,77,724 under section 69B as unexplained investment in a house property.

3. The Assessing Officer had added the aforementioned sum as unexplained investment after a reference to the DVO. However, the Tribunal, in line with the decision in Sargam Cinema v. CIT, emphasized that without rejecting the books of accounts, such a reference to the DVO was unjustified.

4. The Tribunal's decision was based on the premise that in the absence of incriminating evidence found during a search, reliance on the DVO's estimation without discrepancies in the books of accounts was unwarranted. Citing legal precedents, the Tribunal emphasized the necessity of corroborating additions post-search with concrete evidence.

5. The High Court, following its previous ruling in Goodluck Automobiles Pvt. Ltd. v. ACIT, reiterated that a reference to the DVO without rejecting the books of accounts was invalid unless substantial defects were identified. The Court highlighted the importance of assessing the correctness of the cost of construction before resorting to a DVO reference.

6. The High Court noted that its stance was consistent with the Punjab and Haryana High Court's decision in Nirpal Singh v. CIT and the view taken by the Allahabad High Court. Despite a contrary opinion by the Andhra Pradesh High Court, the High Court upheld its position based on established legal principles.

7. Ultimately, the High Court dismissed the Tax Appeals, affirming the Tribunal's decision to delete the addition under section 69B due to the unjustified reference to the DVO without rejecting the books of accounts. No substantial question of law was found to arise from the case.