2017 (1) TMI 1257 - HC - Income Tax

Reference to DVO - non rejection of books of accounts - addition u/s 69 - Held that - The Tribunal while discussing and examining the matter has come to the conclusion that the books of accounts as maintained by the assessee have not been rejected by the AO and such being the defect of the case, it is not open to the AO to refer the matter to the Department Valuation Officer (DVO) for determining the value of the property and in absence of the same the tribunal has come to the conclusion that no addition would have been made on account of investment under Section 69 of the Income Tax Act to the income of the assessee. Assessee has also relied upon a decision in the case of Sargam Cinema Vs. Commissioner of Income Tax 2009 (10) TMI 569 - Supreme Court of India wherein held that once it is found that Books of accounts of the assessee have not been rejected by the AO then it will not be open to him to refer the matter for valuation. This is also the consistent view of the several High Courts. - Decided in favour of assessee

Summary

Issues:
1. Whether addition on account of unexplained investment in the property could be made under Section 69 of the Income Tax Act, 1961?
2. Whether reference to the Department Valuation Cell could be made for determining the value of the House Property?
3. Whether the Assessing Officer should bring material on record to show payments made in the acquisition of the House Property for making addition under Section 69 of the Income Tax Act?

Analysis:
1. The Tribunal concluded that since the books of accounts maintained by the assessee were not rejected by the Assessing Officer, it was not permissible for the AO to refer the matter to the Department Valuation Officer (DVO) to determine the property's value. Consequently, the Tribunal held that no addition could be made on account of investment under Section 69 of the Income Tax Act to the assessee's income. The decision was based on the principle that if the books of accounts are not rejected, the AO cannot refer the matter for valuation, as supported by a decision of the Hon'ble Apex Court and consistent views of various High Courts.

2. The learned counsel for the assessee cited a decision of the Hon'ble Apex Court in the case of Sargam Cinema Vs. Commissioner of Income Tax, where it was established that if the books of accounts of the assessee are not rejected by the AO, then the AO cannot refer the matter for valuation. This aligns with the consistent view of several High Courts. The reliance on this decision further supported the position that in cases where the books of accounts are not rejected, the AO cannot make a reference for valuation, as reiterated by the Hon'ble Apex Court.

3. The substantial questions of law were answered in favor of the assessee and against the department based on the findings that the books of accounts were not rejected by the Assessing Officer. Consequently, the appeal was dismissed in favor of the assessee, emphasizing the importance of the AO not being able to refer the matter for valuation when the books of accounts are not rejected, as established by legal precedents and consistent judicial views.