2017 (3) TMI 393 - HC - Income Tax

Reopening of assessment - scrutiny assessment u/s 143(3) sought to be reopened by AO solely relying upon the DVO s report - Held that - Nothing is on record that except the DVO s report there was any further inquiry and /or material available with the Assessing Officer to form an independent opinion that the income chargeable to tax has escaped the assessment for the Assessment Year 2005-06. As held by Hon ble the Supreme Court in the case of Dhariya Construction Co. (2010 (2) TMI 612 - Supreme Court of India) opinion given by the District Valuation Officer is not per se information for the purpose of reopening an assessment under Section 147 of the Act. Thus solely on the basis of the DVO s report, the Assessing Officer is not justified in reopening the assessment, which was, as such, scrutiny assessment under Section 143(3) of the Act. - Decide n favour of assessee

Issues Involved:
1. Legality of the notice issued under Section 148 of the Income Tax Act for reopening the assessment.
2. Validity of reopening the assessment based on the District Valuation Officer's (DVO) report.
3. Whether the Assessing Officer can reopen the assessment after the Commissioner of Income Tax (Appeals) [CIT(A)] has already considered and rejected the DVO's report.

Detailed Analysis:

1. Legality of the Notice Issued Under Section 148 of the Income Tax Act for Reopening the Assessment:
The petitioner challenged the notice issued by the Assessing Officer under Section 148 of the Income Tax Act, which sought to reopen the assessment for the Assessment Year 2005-06 on the grounds that income chargeable to tax had escaped assessment. The original assessment was completed under Section 143(3) of the Act, and the difference in the property valuation was added as deemed income under Section 69 of the Act. The petitioner argued that reopening the assessment based solely on the DVO's report is not justified, as per the Supreme Court's ruling in Assistant Commissioner of Income-Tax Vs. Dhariya Construction Co., which states that the DVO's opinion is not per se information for reopening an assessment under Section 147 of the Act.

2. Validity of Reopening the Assessment Based on the DVO's Report:
The petitioner contended that the DVO's report, received after the original assessment, cannot be the sole basis for reopening the assessment. The CIT(A) had already rejected the Assessing Officer's request to enhance the deemed income based on the DVO's report. The court noted that the scrutiny assessment was conducted under Section 143(3) of the Act, and the addition was made considering the valuation determined by the stamp authorities. The DVO's report was not available at the time of the original assessment, and the CIT(A) had refused to make any addition based on the DVO's report.

3. Whether the Assessing Officer Can Reopen the Assessment After the CIT(A) Has Already Considered and Rejected the DVO's Report:
The court observed that the CIT(A) had specifically rejected the request to enhance the deemed income based on the DVO's report, relying on its earlier decision in the case of Balkishan Poddar. The CIT(A)'s decision was subsequently confirmed by the Division Bench of the High Court. The court held that once the CIT(A) had refused to make any addition based on the DVO's report, it was not open for the Assessing Officer to reopen the assessment on the same ground. The court also distinguished the present case from the decisions of the Delhi High Court in ACC Ltd. Vs. District Valuation Officer and the Allahabad High Court in Sunder Carpet Industries Vs. Income-tax Officer, stating that these decisions were not applicable to the facts of the present case.

Conclusion:
The court concluded that the reopening of the assessment under Section 148 of the Act, based solely on the DVO's report, was not justified. The impugned notice under Section 148 of the Act for the Assessment Year 2005-06 was quashed and set aside. The petition was allowed, and the rule was made absolute with no order as to costs.

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