2018 (6) TMI 683 - AT - Income Tax

Reference to DVO on account of valuation of construction of Hotel Building u/s 142A - non rejection of books of account - Held that - There is no finding recorded by the Assessing officer regarding rejection of books of accounts - further reference to DVO is even prior to the issuance of notice u/s 148 - thus we don t find any infirmity in the findings of the ld CIT(A) - thus DVO report is not valid and the same was rightly deleted - Decided against the revenue.

Summary

Issues:
Appeal against deletion of addition based on valuation report by DVO without rejection of books of accounts.

Analysis:

Issue 1: Valuation Discrepancy
The appeal was filed by the Revenue against the deletion of an addition of ?1,17,00,260 made by the Assessing Officer (AO) on account of a difference in the cost of construction shown by the assessee and the valuation as per the Department Valuation Officer (DVO) report. The AO referred the case for valuation under section 142A of the Income Tax Act without rejecting the books of accounts. The Tribunal analyzed the facts and determined that the AO could not refer the matter to the DVO without rejecting the books of accounts. The Tribunal referred to relevant decisions, including the Supreme Court's ruling in Sargam Cinema case, and concluded that the addition based on the DVO report without rejecting the books of accounts was not valid.

Issue 2: Assessment Proceedings
The assessee had filed its return of income disclosing Nil income. Subsequently, a reference was made to the DVO for valuation during the assessment proceedings for the previous year. The AO added the difference in the valuation of the hotel building by the assessee and the DVO to the total income. The assessee appealed to the CIT(A), who found that the AO had not rejected the books of accounts for the impugned assessment year. The CIT(A) relied on previous decisions and held that the addition based on the DVO report without rejecting the books of accounts was not valid, leading to the deletion of the addition.

Issue 3: Legal Validity
The Tribunal, after considering the arguments from both sides, upheld the CIT(A)'s decision to delete the addition. It reiterated that the AO could not refer the matter to the DVO without rejecting the books of accounts. The Tribunal referred to relevant legal precedents and emphasized that the assessment proceedings for the impugned year were based on the earlier reference to the DVO without rejecting the books of accounts. Therefore, the Tribunal dismissed the Revenue's appeal, affirming that the addition based on the DVO report without rejection of books of accounts was not valid.

In conclusion, the Tribunal upheld the CIT(A)'s decision to delete the addition, emphasizing that the AO's reference to the DVO without rejecting the books of accounts was not in accordance with legal requirements. The Tribunal's analysis was based on legal principles and relevant judicial decisions, leading to the dismissal of the Revenue's appeal.